Hospitality industry warned to plan for National Living Wage

Claire Dodd

Claire Dodd

16 October 2015

Businesses are being warned to be proactive in preparing for the introduction of the National Living Wage, after new research has found that businesses in the hospitality and leisure industry will likely have their wage bill increased by £13.2m by 2020.

The hospitality and leisure industry will be particularly hard hit by the new measures, according to PwC who conducted the research, due to the large number of low-paid workers in the sector.

Average wage spend for the industry will increase by £2.2m as soon as 2016, according to PwC. The figures are based on the average wage bill increase for businesses with around 11,000 employees.

From April 2016 the government’s new mandatory National Living Wage for workers aged 25 and above will be set at £7.20 – a rise of 70p relative to the current National Minimum Wage rate, and 50p above this month’s increase. According to Government figures, the new rate will result in an average increase of earnings of £1,200 per annum for a full-time worker or the current National Minimum Wage.

PwC found that the hospitality and leisure industry will be the second hardest hit sector after retail, which is estimated to have an expected wage bill increase per business of £25.6m by 2020. The research found that nearly a quarter of the total workforce, at 23%, are currently paid less than £7.20 an hour.

John Harding, employment tax partner at PwC, said: 'While many employers should be able to afford the increase to their wage bill, the disproportionate impact on sectors employing a large number of lower paid workers such as retail, transport and logistics, healthcare and hospitality and leisure can’t be ignored. Organisations must have a plan to deal with these costs, that isn’t simply passing them on to consumers or reducing headcount.

'The National Living Wage announcement is already changing the competitive landscape in the most impacted sectors. How organisations react to this change will set them apart for the future. Given the timetable of proposed increases, even those employers currently paying above £7.20 an hour need to be wary of complacency. Employers who are able to quickly adapt to these changes and embrace them are most likely to thrive as they will be best positioned to attract and retain talent.'

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