UKs new Living Wage to cost retailers 3bn

1-Apr-2016

Lowest salaries increase by 50p in the UK

Retailers are bracing themselves for increased costs as the UKs minimum wage is raised by 50p an hour. Called the National Living Wage, the new scheme sets the minimum salary for workers aged over 25 at 7.20 an hour from 1 April 2016 onwards. The change is expected to affect 1.3 million workers in the UK.

Retail is said to account for around one fifth of workers currently on minimum wage, with hospitality the biggest overall minimum wage employer. Analysis from the Low Pay Commission has suggested that retailers will see the biggest cost from the wages increase. The sector is expected to spend an additional 3bn on salaries each year as a result.

Beauty salons are also set to see significantly higher costs with three in every ten hairdressing jobs currently paying the legal minimum.

Supermarkets Lidl, Aldi and Morrison increased salaries ahead of the change in legislation. Aldi now pays staff 8.40 an hour and 9.45 an hour in London while Lidl staff earn at least 8.20 an hour. Morrison also increased its basic salary to 8.20 an hour.

Sainsburys already pays a standard rate of 7.36 an hour, slightly ahead of the new minimum and Waitrose pays an hourly rate of 7.45. All Waitrose and John Lewis staff are also offered significant benefits including paid breaks and premium pay.

Next has said that it will be increasing retail prices to cover the additional costs of the salary hike. While Tesco and Wilko have stated that they will be reducing premium payments or other benefits as base rates of pay increase.

Last year, high street retailer Oliver Bonas announced that it would be raising its basic salary to 8.25 an hour and 9.40 an hour in London, in line with the voluntary Living Wage Scheme. While the decision cost the business around 700,000 the chain has seen a reduction in staff turnover as well as increased productivity.