Living Wage will cost hospitality £13.2m by 2020

By comparison the annual wage increase expected for the industry in 2016 is £2.2m – the third highest sector increase behind retail and healthcare.

Financial and professional services provider PwC surveyed businesses across the UK and found organisations which currently have a large number of employees earning less than £7.20 an hour will typically see their wage bill rise by £2.3m in 2016 and £15m by 2020.

Employers surveyed said that almost a quarter of their workforce is currently paid less than £7.20 and 39 per cent are currently paid under £9 an hour – which is the target minimum wage by 2020.

Over half of employers (57 per cent) said they are likely to spend more on their wage bill to maintain pay differentials between their lowest pay bands.

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.

“The National Living Wage announcement is already changing the competitive landscape in the most impacted sectors. How organisations react to this change will set them apart for the future.

"Given the timetable of proposed increases, even those employers currently paying above £7.20 an hour need to be wary of complacency. 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.

“While many employers should be able to afford the increase to their wage bill, the disproportionate impact on sectors employing a large number of lower paid workers such as retail, transport and logistics, healthcare and hospitality and leisure can’t be ignored.

"Organisations must have a plan to deal with these costs, that isn’t simply passing them on to consumers or reducing headcount.”

The retail sector will have an estimated £3.8m increase in its wage bill next year and £25.6m in 2020; healthcare is expected to pay an extra £2.5m in 2016 and £14.32m in 2020.

Behind hospitality and leisure, the transport and logistic sector is set to pay an additional £0.6m next year and £9m in 2020