Minimum Wage to rise in 2016: Hospitality industry responds

By Sophie Witts contact

- Last updated on GMT

Minimum Wage to rise in 2016: Hospitality industry responds

Related tags: National minimum wage, Minimum wage

The National Minimum Wage and Apprenticeship Rate are set to rise again in October 2016, but what does this mean for the hospitality industry?

The Government announced this week that it has accepted recommendations from the Low Pay Commission (LPC) to increase minimum wages for workers under 25 years old from 1 October.

It follows the launch of the National Living Wage (NLW) of £7.20 per hour for over 25’s from 1 April.

The hospitality industry – where two thirds of the work-force is over 25 – is set to bear the brunt of the impact.

So what are the new rates?

  • Minimum Wage for 21-24 year olds is rising from £6.70 to £6.95 an hour
  • The Youth Development Rate for 18-20 year olds is rising from £5.30 to £5.55 an hour
  • The 16-17 Year Old Rate is rising from £3.87 to £4.00 an hour
  • Apprenticeship Rate is rising from £3.30 to £3.40 an hour

What does the industry think?

LPC Chair David Norgrove said the changes were designed to address concerns that the new higher rate for over 25’s was ‘unfair’ to younger workers.

But Kate Nicholls, chief executive of the Association of Licensed Multiple Retailers (ALMR)​, warned that the increases placed ‘additional pressures’ on businesses already struggling to adapt to the NLW – which will rise to £9 per hour by 2020.

“If businesses are to have any chance of absorbing theses costs then we need time to allow these increases to settle in,” she said. 

“That means no additional increases to the rate of either National Minimum Wage or the NLW until businesses have adjusted to this change.”

Both the British Hospitality Association (BHA)​ and the British Beer & Pub Association (BBPA)​ called on the Government to offset the ‘overall impact’ of rising wages in this week’s Budget.

BHA deputy chief executive Martin Couchman said: “With the NLW coming in April the BHA proposes that Budget 2016 should include alleviating measures, including reducing Employers’ National Insurance Contributions, preferably by raising the lower earnings threshold, and by delaying the Apprenticeship Levy.”

Brigid Simmons, BBPA chief executive, said the changes could hurt jobs in the already pressured pub sector.

“The increases will have an effect on the cost of employment for pubs, the majority of which are small businesses, so we need the Government to retain a clear focus on tax cuts, in particular beer duty, but also business rates, and a look at VAT in the hospitality sector,” she said.

For a full rundown of what the industry is expecting from George Osborne this week click here.

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