Over half of employers expect to be affected by the national living wage

Joint study from the CIPD and the Resolution Foundation reveals that almost a third of employers plan to manage higher wage costs by improving their efficiency and productivity

Over half of employers expect to be affected by the national living wage

Given the bombshells unveiled in the government’s summer budget earlier this year, one can hardly blame businesses for feeling a little apprehensive ahead of next week’s Autumn Statement. Arguably the biggest surprise of the budget was the introduction of a national living wage, which will entitle over-25s to £7.20 per hour from next year and £9 by 2020. And, as revealed by a new study, over half of employers expect to be affected by the measure.

Of the 1,037 employers surveyed by the Chartered Institute of Personnel and Development (CIPD) and the Resolution Foundation (RF), 54% said the national living wage will have an effect on their wage bill, with 18% expecting it to be affected to a large extent, meaning 46% of employers are currently paying at or above the proposed national living wage. The greatest impact looks like being felt in the retail and hospitality sectors where over three-quarters of employers expect their wage bill to be affected, while over two-thirds of healthcare employers anticipate an impact.

According to the survey, 30% of employers are intending to manage higher wage costs by improving their efficiency and productivity, with 22% planning to take lower profits and absorb costs. A further 16% said they will be reducing overtime and bonuses, 15% intend to raise prices and another 15% will look at reducing the number of employees through redundancies or slower recruitment. However, just 8% of respondents said they would hire more workers under 25, 8% said they would hire more apprentices and only 7% revealed they would cancel or scale down plans for investing in or expanding the business. 

Only 28% of respondents believe that cuts to corporation tax and national insurance will offset at least some of the extra wage costs, with just one in ten saying that tax cuts will offset most or all of the increased costs. However, almost a third of employers were unable to comment on the impact of tax changes.

“The national living wage was a bombshell for most employers when it was announced in July,” said Mark Beatson, chief economist at the CIPD. “For those that have started to think about the consequences, the emphasis on efficiency rather than cost-cutting is welcome. However, our research also suggests that only a small proportion of firms see any substantial connection between the national living wage and other changes to taxes and National Insurance contributions. If the chancellor wants to provide any more support for businesses grappling with the national living wage in the Autumn Statement, it might be better delivered through enhanced business support or special help for the care sector rather than shaving small amounts off general business taxation.”

Here’s to a business-friendly Autumn Statement. 

Adam Pescod
Adam Pescod

Share via
Copy link