National Living Wage rise could cause "unprecedented" cost pressures

By James McAllister

- Last updated on GMT

UKHospitality warns National Living Wage increase could lead to “unprecedented cost increase for employers”

Related tags: ukhospitality, National living wage, Government, Conservative party, Restaurant, Staff

The Government’s plan to further increase the National Living Wage (NLW) over the next five years could cause an “unprecedented cost increase for employers” trade body UKHospitality has warned.

Chancellor Sajid Javid announced the NLW would increase from £8.21 to £10.50 by 2024, in a speech at the Conservative Party Conference in Manchester yesterday (30 September).

It was also confirmed that the age workers can qualify for NLW will be lowered from 25 to 21 in the same time-frame.

The Treasury says the proposal will raise the low-pay floor from around 60% to 66% of median earnings.

According to The Guardian​, were the pay floor to continue to be pegged to 60% of median earnings, the national living wage would be £9.45 an hour rather than £10.50 by 2024.

Responding to the announcement, Kate Nicholls, UKHospitality’s chief executive, says: “The Chancellor’s announcement threatens a double whammy of a further unprecedented cost increase for employers and an adjustment down in terms of age, so we will need a clear regulatory framework with an independent review by Low Pay Commission.

“There needs to be a way to adjust NLW levels to react to economic changes; no fixed end point to achieving 66% median earnings and mitigation measures.

“These measures might sensibly include cutting employment allowance and NICs to help low paid workers keep more money and incentivise job creation.”

Nicholls adds: “Hospitality is keen to attract British talent and part of that process will be to raise entry level wages.

“However, the cumulative costs of regulation and taxes over the past three years have wiped a third off the margins of hospitality businesses and this move, if marshalled in too quickly, will hurt business, damage jobs and not just stifle growth but reverse it.

“The Chancellor wants to be the party of the workers; the Prime Minister, the party of business – the reality is that this country and our economy need it to be both.”

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