Retailers face 25.6 million pounds in extra costs for living wage

Monday, 19 October 2015

Large retailers could see their wage bills increase, on average, by 25.6 million pounds by 2020 as a result of the Government’s national living wage (NLW), according to a new report by PwC. PwC polled 135 businesses with an average of 11,000 employees and found that firms will be expected

to pay an extra 1.6 million pounds on average each in wages next year, and up to 11 million pounds more by 2020 due to the introduction of the NLW.

The sector that will be most affected it predicts will be retailers, as it will be hit almost twice as hard as healthcare the second most affected sector, with a predicted wage increase of 3.8 million pounds in 2016, increasing by 25.6 million pounds by 2020.

Chancellor George Osborne announced the NLW at the summer budget in July, saying that the as of next April the national minimum wage for workers aged over 25 will rise from 6.70 pounds an hour to 7.20 pounds, increasing again to 9 pounds an hour by 2020.

Retailers will have 25.6 million pounds living wage bill by 2020

Those employers surveys said that nearly a quarter of their workforce are currently being paid less than 7.20 pounds an hour, and nearly four in ten are currently paid less than 9 pounds an hour.

To pay for the wage increase, around a third of respondents said they planned to pass on the costs on to customers, and more than a quarter said they planned to reduce their headcount, while half were planning to change pay and grading structures in response to the NLW.

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.

“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.”

A number of retailer’s have already pledged to bring the ‘real’ living wage into force including independent fashion and lifestyle brand Oliver Bonas, who started paying its employees over 18 a minimum of 7.85 pounds an hour, or 9.15 pounds an hour in London from September 1.

Image: Marks and Spencer