Living wage will cause "difficult staffing decisions"

13-Oct-2015 - Last updated on 15-Oct-2015 at 07:18 GMT

Many pubs will have to make tough decisions concerning staffing and jobs because of escalating pay levels and the introduction of the new national living wage (NLW).

With the new hourly rate of £7.20 for workers aged 25 or over coming into force in April 2016, and further hikes in the pipeline, industry leaders have voiced fears about the future of some pubs and argued for affordability for businesses.

'Decisions over staffing'

Responding to the Low Pay Commission (LPC) consultation about the NLW and national minimum wage (NMW) rates, the British Beer & Pub Association (BBPA) warned: “A significant number of pubs are marginal businesses and any increases in costs, such as wages, will lead to decisions over staffing levels.”

The association called for a reform of business rates and a reduction in beer duty to help mitigate the extra costs to businesses. Three successive cuts had helped, it said, but pubs were still closing — with estimates ranging from 13 to 29 per week.

BBPA chief executive Brigid Simmonds said: “The potential cost of the NLW makes it important the Government retains a strong focus on tax cuts and other regulatory burdens.”

'Considerable uncertainty'

Looking ahead to the setting of the new NMW rate in October 2016, the BBPA said it was vital the commission took into consideration the knock-on impact and “considerable uncertainty” of the NLW for operators on staff retention and recruitment.

The Association of Licensed Multiple Retailers (ALMR) said its research shows statutory wage increases has led to reduced profits in 62% of its members’ businesses, which inhibits investment and job creation.

No confidence to put up prices

ALMR chief executive Kate Nicholls said: “The average hourly rate of pay in licensed hospitality in 2015 is £6.78 — and that was before the October increase took effect. But 25% of companies were reporting an average hourly rate of pay for bar staff of more than £7, demonstrating that companies can and will invest in their staff when the economic climate is right.

“There is no doubt that a second increase within six months will be challenging for some, with many reporting that they do not yet feel confident to put up prices.”

Nicholls added that increased payroll costs would lead to a reduction in hours offered by ALMR members of 11.5% and the LPC must “proceed with caution” in setting NMW rates for October 2016.

The ALMR also urged the LPC and the Government to move to a single date for NMW and NLW changes, with all rates being reviewed in April 2017.