April 21, 2016

Could the National Living Wage be the final straw for retailers?

UK retailers are predicting that around a million jobs in the sector – a third of today’s total – will disappear by 2025 as technology and the rising minimum wage reshape the industry.

From the 1st April all employers are required to pay employees aged over 25 years the national living wage. This is currently £7.20 per hour in 2016 and is set to rise to at least £9.00 per hour by 2020. This is expected to cost retailers £3.26 billion per year in extra pay, national insurance and pensions.

Retailers currently employ one in six British workers – about 3m people – and the sector accounts for a tenth of the economy.

The retail industry also has the highest proportion of poorly paid staff of any industry and the increase in wage bills is expected to be the last straw for many shops especially smaller ones.

Steps retailers have taken to combat the increase:

  • The food chain Eat has removed paid breaks. Employees working 6 hours or more were previously paid for their 30 minute break. Since the introduction of the living wage this break is now unpaid.
  • Tesco are currently in consultation with their employees to reduce premium rates for working unsocial hours. Currently employees receive double time for shifts worked on a Sunday or on a Bank holiday. From July this will be reduced to time and a half. Special payment for night work will only apply from midnight-6am, rather than form 10pm-6am at present.
  • B&Q have made similar moves to Tesco. The raise in basic pay will be offset by removing allowances, including extra pay for working on Sundays and reducing pay for shifts worked on bank holidays. Employees currently receive double pay for Sundays this will now change to time and a half. They have also removed the summer and winter bonus scheme.
  • The Hotel sector have taken more drastic action by replacing employees with self service “speedy check-in” kiosks in some of its hotels.

Ways you can reduce the impact of the living wage on your business.

There are several ways in which you may decide to deal with the increase. You could…

  • Stop bonus payments and cut down on overtime
  • Increase productivity by streamlining your processes to increase efficiency; have clear job descriptions, set targets, implement training etc
  • Reduce the number of hours employees work; this will save money but is likely to reduce productivity
  • Reduce the number of employees by not replacing people who leave or by redundancies; your remaining employees will absorb the work
  • Employ younger workers; cheaper wage bill but less experience
  • Pass the additional costs on to your customers
  • Absorb the increased costs and cut your profit.

If you are considering making changes to your employees’ terms and conditions or you need support on any employment law issue, contact us. You can also check out our handy resources for employers.

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About the author

Gillian Smith

Gill has over 10 years HR generalist experience within the retail and industrial service sectors.Whilst providing HR support and services at the most senior levels Gill’s experience includes mergers and acquisitions, complex TUPE transfers, organisational development, and strategic change management. Gill has experience in the policy development process from design, consulting with directors and employee representatives through to implementation and delivering training workshops on the new polices. Gill currently is an HR policy consultant who services a variety of clients.