More than half (54%) of all UK employers say the new National Living Wage will affect their wage bill; and the retail and hospitality sectors are set to be hit hardest according to new research.
A survey by the CIPD, the professional body for HR and people development, and the Resolution Foundation has revealed the potential impact of the National Living Wage (NLW) on firms in low-paying sectors.
The poll of over 1,000 employers shows that the higher wage floor will have its greatest impact in retail (79%) and hospitality (77%), where over three-quarters of employers say their wage bill will be affected. In addition, more than two-thirds of employers in the healthcare sector (68%) will be affected.
The survey asked respondents to name the three most important things they plan to do in response to the NLW. It found that:
- 30% of employers intend to manage these higher costs by improving efficiency and productivity;
- 22% plan to take lower profits or absorb the costs;
- 16% said they would reduce overtime and bonuses;
- 15% expect to raise prices;
- 15% will reduce the number of employees via redundancies or slower recruitment.
However, 26% of employers said it was still too soon to say how they would manage the cost implications.
Conor D'Arcy, policy analyst at the Resolution Foundation, said: "The new National Living Wage will have a huge impact on the labour market when it comes into effect next April, with millions of workers set to get a pay rise and half of all employers saying they'll be affected. It's encouraging that so many firms say that they'll respond to the new higher wage floor by improving efficiency. But actually delivering this will prove challenging in many sectors, and it's important that firms are given the necessary support to boost productivity."
The survey also found that, of those firms who say they'll be affected by the NLW, 26% say that it will reduce pay differentials between those affected and their managers; while 20% said they would maintain pay differentials.
This suggests that the NLW could have a positive ripple effect for higher-paid workers. Recent research by the Resolution Foundation has found that 2.8 million workers would directly get a pay rise as a result of the new National Living Wage by 2020, with a further 3.2 million workers receiving an indirect benefit as employers seek to maintain pay differentials between staff.