A new survey of 135 businesses with an average of 11,000 employees reveals that they each expect to pay an extra £1.6 million on average in wages across 2016, and up to £11 million more by 2020 due to the introduction of the National Living Wage. Retailers expect the biggest wage bill increases next year.
PwC surveyed the businesses to understand how they are preparing for the introduction of the new National Living Wage. According to the survey, those organisations which currently have a large number of employees earning below £7.20 an hour, and will therefore be affected from the first year, will typically see their wage bill rise by £2.3 million in 2016 and by £15 million come 2020.
Those employers surveyed say that nearly a quarter of their workforce (23%) are currently paid less than £7.20 an hour, while nearly four-in-ten (39%) are currently paid less than £9 an hour (the target wage by 2020).
PwC suggests that businesses should start planning on how they will implement the National Living Wage now, even if they will not be immediately impacted in 2016. This is a chance for organisations to consider where they want to position themselves in the market and review their pay and benefit structures accordingly.
It’s important that any changes are fit not only for the National Living Wage but broader pay changes. These changes include increasing pension auto enrolment contributions, holiday pay changes, the new apprenticeship levy and gender pay gap reporting.
Over half of employers (57%) say they are likely to spend more on their wage bill to maintain pay differentials between their lowest pay bands. In the most impacted sectors, PwC anticipates the cumulative impact of these costs will drive wider business innovation.
Around a third of respondents (32%) say they are planning to pass on the increased costs to customers. Over a quarter (26%) state that they plan to reduce their headcount due to the increased wage bills. Half of respondents say they are planning to change their pay and grading structures in response to the National Living Wage.
The table below sets out the expected wage bill increases for the different sectors based on the survey respondents:
|Sector||Predicted wage bill increase in 2016 (each)||Predicted wage bill increase by 2020 (each)|
|Retail||£3.8 million||£25.6 million|
|Healthcare||£2.5 million||£14.3 million|
|Hospitality and Leisure||£2.2 million||£13.2 million|
|Transport and Logistics||£0.6 million||£9 million|
John Harding, employment tax partner at PwC, said: “The National Living Wage will be a great boost for millions of workers. Businesses have been given time to prepare for these changes and should be using this as an opportunity to introduce wider workforce interventions and technology to improve productivity, rather than defaulting to passing the costs on to consumers.”
Harding continued: “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.”
In conclusion, Harding asserted: “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 cannot be ignored. Organisations must have a plan to deal with these costs that isn’t simply passing them on to consumers or reducing headcount.”
Richard Sykes shortlisted for Living Wage Leadership Awards 2015
Richard Sykes, CEO of ISS UK and Ireland and chairman of the Living Wage Service Providers Leadership Group has been shortlisted by the Living Wage Foundation for its Living Wage Leadership Awards 2015.
The Living Wage Leadership Awards recognise the life-changing impact individuals have made by leading the way on the Living Wage Campaign within communities.
Sykes commented: “I’m delighted to be shortlisted by the Living Wage Foundation for its award this year. Paying the Living Wage – as set by the Living Wage Foundation – is a positive move to be welcomed by business and our communities. Morally and ethically, it’s the right thing to do.”
Sykes added: “As a service provider, the facilities management sector is responsible for employing a large proportion of UK workers. By joining forces with the Living Wage Foundation and initiating the Living Wage Service Providers Leadership Group, we’ve now encouraged over 50 service providers to sign up to the Living Wage. Together, we can help to further promote the benefits of the Living Wage to our clients and, indeed, a wider audience.”
Employers choose to pay the Living Wage – as set by the Living Wage Foundation – on a voluntary basis. The Living Wage enjoys cross-party support. Decisions about what to include in this standard are set by the public. It’s very much a social consensus about what people need to make ends meet.
Living Wage Foundation director Rhys Moore stated: “Congratulations to Richard Sykes on being shortlisted for the Living Wage Leadership Award in the London region. The voices of people are at the heart of our organisation, and it is wonderful for Richard to be leading the way in driving the Living Wage Foundation’s Living Wage. We want to celebrate the individuals making a real difference to families and communities across the UK.”
The 2015 winners will be announced during Living Wage Week 2015, with one winner announced for each region of the UK: Scotland, Wales, Northern Ireland, the East Midlands, the West Midlands, the East of England, Yorkshire and the Humber, North East England, North West England, South East England, South West England and London.
The awards are judged by an independent panel of community leaders from Citizens UK, the national community organising charity and home of the Living Wage campaign.