The recent introduction of the National Living Wage was warmly welcomed. Many, from religious leaders to equality campaigners to charities to politicians saw the National Living Wage (LW) as a fairer way to pay workers. It was described by Chancellor of the Exchequer George Osborne memorably as a pay rise that British workers deserved. Many saw the LW as a step to tackle poverty and low pay.
Many businesses, however, were not so enthusiastic. For many businesses, it was predicted that, with rising wage bills, staff numbers would have to fall. Job losses were predicted, up to 60,000 by 2020, according to the Office of Budget Responsibility.
A recent survey conducted by the Resolution Foundation (an independent not for profit organisation which analyses and takes action on matters concerning society and social justice) was the first snapshot of information on the impact of of the LW on British businesses.
Five hundred companies, across different sectors, were questioned just before the EU Referendum. Of those 500 companies, 215 said that the new LW had impacted upon their wage bill. Some 36% of those businesses affected by the new LW said that they had put up their prices to compensate for a higher wage bill. 29% said they had seen reduced profits. Despite indications of some employers having to cut back on staff terms and conditions, and staff perks, the survey found that only 8% of companies had cut paid breaks, overtime, Bank Holiday pay or similar.
The LW policy was announced in last year’s Budget by then Chancellor George Osborne; in his statement at the time, he said it was a move to create a higher-wage, lower-welfare British economy. Realising the opposition and likely reaction of many businesses, he had also warned businesses not to cut staff perks and benefits to compensate for an increased wage bill.
With the new LW requiring workers aged 25 or over to be paid at least £7.20 an hour, workers aged 21 to 24 still continue to be paid the National Minimum Wage (NMW) of £6.70 an hour. The rules for pay whilst in apprenticeships are different. Several big name firms across various sectors, such as DIY chain B&Q, supermarket Tesco, the Caffe Nero coffee chain and John Lewis Partnership have all deduced some staff payments or perks over the last year. Most of those, and other companies, have stated that the loss of some staff perks and pay were unrelated to the 50p per hour wage increase they faced from April with the LW.
Responding to the Resolution Foundation survey, a spokesman for the Department for Business stated that the government “wants to move to a higher wage, lower tax and lower welfare society and the National Living Wage is a crucial part of achieving this. It is encouraging to hear that employers are investing in training and technology which will help to improve productivity… We recognise that employers are responding to the [LW] in a variety of ways depending on their circumstances. The Low Pay Commission will recommend the level of the [LW] going forward to make sure that wages rise to reward workers while considering the impact on the economy.”
Whilst many welcomed the National Living Wage – overall business was not so keen. The survey from the Resolution Foundation shows that the impact of the wage rise was not so dire as many in business predicted. Although there has been some negative impact upon businesses facing a larger wage bill – overall National Living Wage had proved to be of benefit to hard pressed workers.