National Living Wage hits smaller businesses harder, LPC admits
The National Living Wage (NLW) may have had a disproportionate effect on convenience stores and other micro and small businesses, the Low Pay Commission (LPC) has admitted.
The report, A rising floor: the latest evidence on the National Living Wage and youth rates of the minimum wage, shows 18% of workers in micro firms and 12% in small firms, as represented by most convenience store businesses, are more likely to be paid the minimum wage than those in large firms (nearly 7%) and very large (6%).
Its analysis comes as the NLW increases tomorrow (1 April) by 30p to £7.50 an hour for 25-plus-year-old workers.
The report said there was a small decrease in the number of employees across “low-paying occupations” this last year compared with 2015, which it said might reflect early signs of the higher minimum wage’s effect. It could also reflect broader changes to the labour market and economy and it is seeking more evidence to work out how employment will respond across the economic cycle.
However, the Association of Convenience Store’s (ACS) own research into the impact of the NLW suggests the former. The ACS has found that 74% of all convenience stores have had to reduce the number of staff hours because of the introduction of the £7.20 last April.
Some 76% of those that have had to lay off staff altogether in the last 12 months reported that this was because of increased employment costs.
The government’s stated intention is for the NLW is to reach 60% of median hourly earnings in 2020, which on current projections, would be about £8.75.
ACS chief executive James Lowman said: “Convenience stores of all sizes have faced significant increases in their employment costs over the last year through the introduction of the National Living Wage, two rises in the National Minimum Wage in 2016 and the phasing in of automatic pension enrolment.”
Its members said they were already having to make difficult decisions in their business because of rising employment costs, including reducing staff hours, taking on more hours in the business themselves and delaying investment plans.
“We will be engaging with the Low Pay Commission throughout 2017 to demonstrate the impact that continuing hikes in wage rates are having across our sector,” he said.
Tomorrow will also see an increase in the National Minimum Wage. The hourly rates for those aged 21-24 will rise from £6.95 to £7.05, 18-20 from £5.55 to £5.60, under 18s from £4-£4.05 and for apprentices from £3.40 to £3.50.