Hourly hospitality pay outstripping minimum wage

By Mark Wingett

- Last updated on GMT

Hourly hospitality pay outstripping minimum wage

Related tags: National living wage, Minimum wage

Hourly pay for UK hospitality workers is already significantly outstripping new legal minimum wage thresholds, research by Fourth Analytics has revealed.

Average rates for UK hospitality workers have now hit £7.71 per hour for all ages including under 21s, BigHospitality's sister site MCA has reported.

Excluding the under-­21 group, the average hourly rate in hospitality is £7.92 – which is 72p higher than the national living wage (NLW) of £7.20, a new rate that was introduced for workers aged 25 and over in April 2016.

Fourth said operators were turning to productivity-­boosting initiatives to combat an 'era of aggressive labour inflation'.

The average hourly pay for all ages (£7.71) has risen by 12.6 per cent in the past two years – and is up by 24p in the three months since June 2016 alone.

Fourth, a software provider for the hospitality industry, predicted hourly rates would reach £8 in January 2017 and approach £8.50 by April 2017.

The findings were released as NLW was expanded to workers aged 18­-20 and 21-­24.

The research also revealed that the gender gap had completely disappeared, with men and women earning the same; the regional pay gap was narrowing between London and the rest of the UK since the introduction of the NLW; and that sales per worker had increased.

Competition for staff

Commenting on the finding, Mike Shipley, analytics and insight solutions director at Fourth, said: “With actual pay significantly outstripping the legal minimum for all age thresholds, businesses are clearly experiencing very strong employment-­cost inflation.

“Clearly it is difficult to predict whether this momentum will continue but there’s no sign of a levelling off at the moment. We expect to see the hourly­-rate average in hospitality hitting £8 in January 2017, and we could well see average rates approaching £8.50 by April 2017 – when the next incremental increase comes into force. This could see the minimum legal living wage (for over­-25s) move up to between £7.50 and £7.65.

“What’s particularly striking is that the under­-21s are fast catching up, earning on average £1.53, or 29 per cent, above their legal rate. This could be driven by wage parity policies, and also general competitive pressure for good people.”

Rising regional wages

The figures show companies with operations outside of London have seen staffing costs rise more sharply, placing pressure on operating margins.

Since the introduction of the NLW, the regional pay gap between London and areas beyond the M25 has narrowed – from 25p in 2014­-2015, to 11p (October, 2016).

While the hospitality industry is experiencing significant wage growth, it also seeing growth in sales achieved per worker per labour hour, which has risen from £31.94 in 2014 to £34.88.

In that time labour costs as a percentage of sales have risen from 27.3 per cent to 28 per cent.

Commenting on how companies were meeting the hospitality pay challenge, Shipley added: “It is clear that many of our clients are engaged in productivity programmes and initiatives, such as smarter rota scheduling and driving the amount of revenue taken per worker / per labour hour.

“It is one of the key ways that hospitality and leisure companies can combat this era of aggressive labour inflation.”

Further increases in the National Living Wage are due next April, 2017.

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