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Summer Budget 2015: Hospitality industry mulls 'considerable impact' of compulsory Living Wage

By Emma Eversham+ , 08-Jul-2015
Last updated on 09-Jul-2015 at 10:14 GMT2015-07-09T10:14:29Z

Hospitality businesses will be mulling over the financial impact of George Osborne's Summer Budget
Hospitality businesses will be mulling over the financial impact of George Osborne's Summer Budget

Introducing a compulsory Living Wage will have a 'considerable impact' on the hospitality industry, trade bodies have warned with employers facing higher wage bills and greater administration. 

Martin Couchman, deputy chief executive of the British Hospitality Association (BHA) told BigHospitality Chancellor George Osborne's announcement that all over 25's would have to be paid a National Living Wage of £7.20 or more from next April had been unexpected and would effectively result in employers having to add an extra 14 per cent to wage bills of workers over 25.  

"Hospitality will be the biggest industry affected by this," he said. "A very substantial part of the workforce are paid at the higher National Minimum Wage rate and they are the ones who will be paid the compulsory National Living Wage. It will also mean that from April the accounts department will have five different wage rates to deal with. 

"With less than a year's notice many employers will be getting the cold flannel out and starting to look at the impact now of this news." 

Kate Nicholls, chief executive of the Association of Licensed Multiple Retailers (ALMR) urged the government to take a 'thoughtful approach' over the introduction of the Living Wage 'that will take into account the amount our workers take home, their total earnings and benefits such as pensions not just the headline hourly rate'

"We also need some sensitivity surrounding the timetable for introduction, with wage rounds currently planned around April," she said. 

Off-set

Although the introduction of a National Living Wage would have a big impact on the industry, Couchman said it would be off-set slightly by the news that Corporation Tax will be cut to 19 per cent in 2017 and 18 per cent in 2020 and reductions in the cost of Employers National Insurance, a move welcomed by British Beer & Pub Association chief executive Brigid Simmonds.  

“There are some very welcome measures for beer and pub businesses, with the cut in Corporation Tax, reductions in the cost of Employers National Insurance, and the rise in the Annual Investment Allowance," she said. “Some of the measures, such as the Living Wage and reductions in tax credits, will have a knock-on effect on the cost of employment for pubs, so the tax cuts announced today are a welcome and necessary balancing measure."

Nicholls said the government's plans to increase apprenticeships and reduce the amount of red tape around them was also welcomed. 

"Pubs doubled the number of apprenticeship starts last year and crucially all our training results in a real job at the end of it. We need to reduce the red tape surrounding apprenticeships and putting employers in the driving seat and rewarding those who invest in training through the PAYE regime is good news and something we have been campaigning on for some time. It is encouraging to see these acknowledged as vital areas for investment," she said.  

Left-out  

There was disappointment from many on the lack of a VAT cut for hospitality and no mention of business rates reform. 

Mark Rigby, chief executive at CVS said: This Budget offers no clear signal that the confusion around business rates reform is going to be resolved any time soon.  While a clear ‘business tax roadmap’ published by April 2016 is welcome, the Chancellor had nothing new to offer those affected by a broken business rates system.

“Confusion surrounds business rates reform – on one hand, the Queen’s Speech committed to reform the appeals process through the Enterprise Bill due to be published in October, while on the other the wider business rates review will conclude by the end of this year.  UK businesses want to see clear action and the first step is a clear structural timetable."

Simmonds added: “As well as the tax cuts announced, we will be looking to see that the government continues to support brewing and pubs in other parts of the tax system, such as through future action on business rates and further cuts in beer duty, which are a big help to pubs."

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