Nearly a fifth of companies say that they’re going to have to put prices up next year when Chancellor George Osborne introduces the new national living wage, according to a major new study.
The survey, created by think-tank the Resolution Foundation and the CIPD, asked more than 1,000 employers how they would cope with the new wage, which will legally require companies to pay all employees over 25 at least £7.20 per hour.
It showed that when asked about how they would cope with the likely increases in their wage bills, 15% of companies said that they would put prices up; a further 15% said they’d be forced to make redundancies, or slow recruitment; and 16% said they’d trip bonuses and overtime given to staff.
22% of respondents said they’d just have to accept lower profits, and most popular way of coping with the national living wage was to try and increase productivity. 30% of employers said they will do this come April.
Of the companies surveyed, 54% said that the Chancellor’s new living wage would increase their total wage bill, with the worst affected industries being retail and hospitality, where 79% and 77% of companies said that wages would have to go up overall.
Numerous companies have already complained that changes to the minimum employers can pay their staff will hurt their ability to make money.
In September, Wetherspoons boss Tim Martin, who has been an outspoken critic of the wage increase, said: “By pushing up the cost of wages by a large factor, the government is inevitably putting financial pressure on pubs, many of which have already closed.” A few weeks later, the pub chain reported a narrowing of profit margins, as it increased wages to comply with the new rules.
Whitbread, which owns Costa Coffee and Premier Inn, has also previously said it will need to put up prices to cope with wage increases.
In a statement on Wednesday, CIPD chief economist Mark Beatson said that he thought the changes to minimum wage might have caught employers by surprise: “The national living wage was a bombshell for most employers when it was announced in July. It comes into force next April, which does not give employers a lot of time to prepare. Hence we found 26% of employers in September saying it was still too soon to say how they would manage the cost implications.”
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