Retail sector to be most affected by the National Living Wage

Retail, wholesale and hospitality sectors are going to be long the most “severely affected” by the National Living Wage (NLW), according to new research conducted by the Social Market Foundation in partnership with Adecco Group.

The report analysis the potential impact of the new rate on businesses across the UK and found that a large number of private sector businesses will need to overcome significant productivity challenges in order to cope with the cost of implementing the new National Living Wage.

The research highlights that 40 percent of workplaces will be severely affected by the National Living Wage, financial performance is a key factor in determining pay, while 47 percent have traditionally linked salary decisions to the minimum wage. This raises important questions about how these organisations can equip themselves and their staff to cope with rising wage bills.

The new National Living Wage affects a quarter of private sector employees, more than double the proportion of employees in the public sector, and almost a fifth (18 percent) of employees who will benefit from the new rate are younger workers, and surprisingly, workers aged 50 or over make up a third. The National Living Wage cut-off at age 25 means businesses will be faced with potential discrepancies in wages across their younger workforce.

Retail to be “severely affected” by National Living Wage

The report is also predicting that workplaces severely affected by the new rate are much less likely to provide ongoing training and development opportunities to their staff, with 46 percent providing no training at all, or providing training to less than a fifth of their experienced staff in a six month period. The prevalence of part-time workers may also present particular challenges to businesses because the case for investing in their skills may be weaker than for full-time workers.

Nida Broughton, chief economist at the Social Market Foundation, said: “The low stock of skills amongst those affected, and the relative lack of access to in-work training, means that businesses and the Government will have to act to make sure that workplace productivity rises alongside the new regulated wage.

“If businesses can increase productivity there is less likely to be a risk of higher unemployment as a result of the introduction of the NLW, and workers will be more likely to benefit.”

Alex Fleming, managing director and member of the board of directors, Adecco Group UK and Ireland, added: “The National Living Wage has the potential to reduce wage inequality and improve people’s lives across the UK. The challenge for businesses, particularly in sectors including retail, wholesale and hospitality, will be in mitigating the impact of the new rate across their workforce and boosting productivity to avoid job losses.

“Businesses should consider training as one of the best ways to respond. Many workers eligible for the rate are low-skilled with little further education beyond their GCSEs. This research shows the value of investing in training and skills for long-term. It is crucial that employers consider what these changes mean for them, rather than relying on a one-size-fits-all analysis of any potential impact.”