Rising hourly pay will minimise impact of National Living Wage

By Sophie Witts contact

- Last updated on GMT

Rising hourly pay will minimise impact of National Living Wage

Related tags: Living wage, Minimum wage

Rising hourly rates of pay for hospitality workers means the Living Wage could cost the industry far less than originally predicted, according research from Fourth Analytics.

From April all businesses will have to pay staff over the age of 25 £7.20 per hour, a 50p rise on the current minimum rate.

But analysis shows that the average hourly rate for over-21s working in hospitality rose from £6.96 to £7.04 last year, just 16p shy of the new Living Wage.

The rate also exceeds the minimum wage of £6.70, which rose 20p in October 2015.

The study examined data on the hourly pay of 3,000 hospitality and leisure businesses including restaurants, hotels and pubs.

Fourth said that its research showed that the industry had already moved to paying staff higher wages, which would minimise the impact of the Living Wage in April.

How will the rising Living Wage affect hospitality?

Mike Shipley, analytics and insight solutions director at Fourth, said: “Our insight suggests the perceived gap between current pay rates and the new Living Wage is nowhere near as big as some in the industry may think.

“However, it is clear that the hospitality industry is already paying a premium, presumably to compete for the best people, and it’s a question of whether operators maintain that premium.  If so, we could see hourly rates pushing the £8 mark and beyond, which will also put upward pressure on other more senior pay grades, potentially triggering wage inflation across the payroll at hospitality organisations.

“It is also important to remember that further annual ratchets are scheduled, such that the living wage will rise to £9 by 2020, meaning a salary of almost £22,000 for a 25-year-old working a 48-hour week. Businesses need to continue to work extremely hard to find ways to absorb these jumps.”

Staff more productive

The analysis also suggests the industry is seeing a rise in productivity, with sales generated per labour hour increasing from £32.33 to £33.11 in the 12 months to September 2015 – up 2.4 per cent year-on-year.

Shipley said “The new living wage will inevitably prompt companies to look harder at productivity and efficiency. We are currently working with many different hospitality and leisure companies, looking at these issues and using analysis to drive revenue per labour hour and to identify and eradicate wasted labour hours.

“It is a complex challenge but one that can deliver substantial productivity gains, and that is the key to weathering what will surely be a new era of labour inflation for hospitality.” 

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