From today (Wednesday 1 April), the NLW will increase to £12.71, an increase of 4.1%. It means business will have to pay a full-time worker on the NLW an additional £900 a year, rising to £1,500 for those on the NMW.
Workers aged between 18 and 20 will need to be paid £10.85 per hour, representing an 85p leap from before, and 16 to 17-year-olds and apprentices will receive £8 per hour – a 45p lift.
In total, the wage rises represent a £1.4bn rise in additional costs for hospitality businesses, trade body UKHospitality (UKH) estimated when the changes were announced.
Barons Pub Company managing director Clive Price criticised the Government for using headline wage increases as a political win, reminding MPs it is businesses that pay employees.
“The Chancellor can stand at the dispatch box and claim to have given everyone a pay rise, but it is not the Government that pay the wages, it is businesses. The Government gets to look good and collect all the additional revenue – genius”, he The Morning Advertiser (The MA).
Disproportionately affected
Price added the Surrey-based pubco, which last week won Best Pub Employer (up to 500 employees) at the Publican Awards, was expecting its costs to rise by 5.5% following the increases.
He stressed while operators support the principle of increasing minimum wage, the pace at which it has risen had become damaging, with hospitality “disproportionately affected”.
Last year, data analysis conducted by The MA last year showed wage costs have soared by more than 40% in the past years.
“It’s becoming more and more expensive to employ people.”
JW Lees managing director William Lees-Jones
At JW Lees, managing director William Lees-Jones said the company’s wage bill will increase by more than £900,000 as the changes take effect, after already rising by £1.2m in the past year.
“It’s becoming more and more expensive to employ people”, he said. “At least the increases are less than previous years but this was a manifesto promise so we knew it was coming.”
To offset the cost pressures, operators have focused on efficiencies across their estates.
Price explained Barons has focused on enhanced training and modest price rises to offset the cost pressures.
“There are not many more efficiencies we can find in the business without affecting the customer experience, and that would be a slippery slope,” he continued.
Meanwhile, Lees-Jones said the Manchester-based brewer and operator has tightened shift planning, reduced opening hours and encouraged use of its order & pay app to cut staffing levels and overtime.
The managing director warned continued wage rises would lead to “polarisation”, forcing operators towards either higher prices or more automation.
Unaffordable luxury
Lees-Jones further urged the Government to link future wage increases to its inflation target to create more stability in both prices and wages.
In addition, Price cautioned sustained wage growth risked making pub visits an unaffordable luxury for consumers struggling with the cost-of-living, while also having a negative effect for younger workers seeking employment.
New data from UKHospitality, in collaboration with the British Beer & Pub Association, British Institute of Innkeeping and Hospitality Ulster, highlighted the potential impact. Among those surveyed, 64% said they may cut jobs, 51% could cancel investment plans and 42% may reduce trading hours, while 15% of venues risk closure.
However, Price, who also chairs the British Institute of Innkeeping (BII), told The MA ministers were beginning to appreciate the effects of rapid wage escalation.
“The economic argument is clear; it has been damaging. MPs are recognising that losing jobs and employment is not a good thing”, he added, reiterating the sector’s calls for a VAT reduction.
“Something has to give somewhere,” he said. “There is little joined up thinking and I would urge the Government to properly listen to the trade bodies representing us so well and formulate a coordinated strategy that [tackles] taxation, energy costs, minimum wage, duty and regulation.”
