A 50p an hour wage hike will cost Costa Coffee’s owners £5 million

A Costa Coffee barista.
A Costa Coffee barista. Costa Coffee

The UK government’s Living Wage plan will cost Whitbread, the owner of Costa Coffee, as much as £5 million ($US7.7 million) a year, the company said on Tuesday

Staff across its businesses, which include Premier Inn, will get £7.20 an hour — up by 50p — from next year.

Baristas in Costa Coffee will get a minimum of £7.40 an hour.

The new pay scale puts Costa employees above the government’s National Living Wage of £7.20, which will come into force next year.

It’s not all bad news for the companies though.

For the six months to August 27, Whitbread’s pre-tax profits rose 5.4% to £254.9 million ($US394.57 million), on the same period last year. Meanwhile, total sales rose 11% to £1.44 billion ($US2.22 billion).

In September, Andy Harrison the chief executive of Whitbread said that new minimum wage rules will mean that it will be “a challenge for a company like us where labour is a big part of our costs.”

Overall, Whitbread said in its interim results statement that the wage hikes will cost it up to £20 million ($US31 million) in the next five years. However, we won’t know the full impact that these increases will have on Whitbread’s bottom line until it announces its full year results.

Tuesday’s annoucement also marks the last results release for Whitbread’s current boss. Andy Harrison will step down in December, being replaced by Alison Brittain, who used to be boss of Lloyds Bank’s retail operations.

Whitbread’s chairman Richard Baker said of Harrison’s departure “Andy joined a good company five years ago and, when he leaves us in a few weeks, he will leave it an even better company, with excellent foundations for future profitable growth.”

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