Retail and hospitality bodies have issued warnings over the impact of the expected rise to the national living wage (NLW).
The government yesterday (21 November) confirmed the NLW will rise by 9.8% from £10.42 to £11.44 per hour in April, amounting to the largest ever cash increase to the minimum wage.
The age threshold for the NLW has also been lowered to 21 and over, previously 23 and over.
It puts the government on track to meet its target of increasing the NLW to two-thirds of median earnings by 2024.
The separate national minimum wage for 18 to 20-year-olds will also increase to £8.60 an hour from £7.49, while apprentices will receive an hourly pay rise of over 20%, going from £5.28 to £6.40.
The Association of Convenience Stores and UKHospitality have warned over the “significant knock-on impact” that the rise in staff costs will have on businesses.
“A national living wage of £11.44 from April reaches the government’s long-standing target of reaching two-thirds of median earnings by 2024,” said ACS CEO James Lowman. “This will be tough for many local shops to afford, having struggled with a cost of doing business crisis for nearly two years now, and with wage bills the biggest expense for most retailers.”
Findings from the ACS National Living Wage Survey 2023 revealed that retailers have previously responded to increases in the NLW by taking lower profits (69% of stores), reducing staff hours (56%), reducing the amount they invest in their business (50%) and automating certain processes (50%).
The trade body has consequently called for a pause on future increases if rates prove to have a detrimental impact on employment opportunities and investment.
These could include a shift towards more gig economy employment, or a reduction in in-work progression.
UKHospitality CEO Kate Nicholls said there must be action to drive down costs in other areas if businesses are expected to deliver the hike in wages.
“The first priority on that list needs to be extending business rates relief and freezing the multiplier at the autumn statement,” she said.
“Without action on business rates today, many businesses will not even make it to April to deliver these wage increases and jobs will be lost. That scenario benefits no one.
“In the longer term, stronger consideration needs to be given to a lower rate of VAT for hospitality to create a more sustainable tax burden for a sector that employs 3.5 million people and delivers £93bn to the economy.”