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< Back to news 25 February, 2016

Counting down to the National Living Wage

Ahead of the National Living Wage implementation from April, businesses are starting to feel the financial strains already.

For most businesses, the financial year end is almost upon them, and preparation for FY 16/17 has likely already been finalised, but businesses are already seeing price rises in products and services, attributed to the National Living Wage (NLW).

The cost implications of the new National Living Wage are huge: a 7% increase for those already on National Minimum Wage, which equates to £910 per annum for a full-time employee. These changes will potentially impact a huge number of businesses as not only will their payroll outgoings increase, but supplier prices may also increase to cover their own rising costs.

Recent pricing notifications from a variety of Beacon suppliers have outlined price increases of up to 4%, with most of these specifically citing the National Living Wage as a main cause.

One Beacon supplier detailed exactly how the new wage will affect their business:

“We wholly support the introduction of the National Living Wage, which will apply to many of our staff. It has to be appreciated however, that the new wage represents a significant cost increase and unfortunately, given its scale and the large number of staff to whom it will apply, we will not be able to fully offset it with cost saving initiatives we are pursuing in other areas. In order to fully cover the increase in costs we would need to apply an increase of 4.1% to cover living wage and 1.5% increase to cover inflation.”

Speaking at the recent Beacon Exhibition, Louise Bloomfield, Partner at DAC Beachcroft in its nationally recognised leading Employment & Pensions Group offered some advice for business owners, including those interested in hiring more apprentices to find cost effective ways to mitigate further staffing cost increases.

“There are steps employers can make during the recruitment process to minimise the impact of this new wage. Employers should look at their resourcing models and, for instance, their use of agency staff or contractors, or how they use apprentices who, for example, attract a lower hourly rate but can be a strong resource to invest in.

“The risks associated with not paying National Living Wage are far too great for businesses to ignore. Not only can failure to pay be a criminal offence, it carries a maximum penalty of £20,000 per employee, as well as 200% of any arrears and directors can also face a disqualification of up to 15 years. Employers can also be ‘named and shamed’ in public, which will be hugely detrimental to any business.”

Paul Connelly, Managing Director at Beacon, commented:

“Beacon is urging the government to look again at supporting businesses in the hospitality industry, to help ease the widespread pressure that is being felt throughout the sector. A recent survey by Beacon’s sister company, Best Western, revealed that 90% of respondents might have to increase prices to mitigate the increase to staff salaries, 80% said they would rethink recruitment.

Our fear is that the Office for Budget Responsibility’s estimate of 60,000 job losses will be disproportionately distributed among small and medium sized businesses in the hospitality industry, those that are least likely to be able to absorb the costs.

Although Beacon cannot stop suppliers from passing on price increases due to the National Living Wage, we are maintaining our stringent controls over cost to mitigate these inevitable price increases as much as possible.”

If you would like to find out more about Beacon and how we work with our supply partners to allow you to run a more profitable business, click here or call the Beacon team today on 01904 695588.