Plans to introduce a National Living Wage (NLW) will have a ’major impact’ on skilled sectors like bakery, industry leaders have warned.
Chancellor George Osborne unveiled the plan yesterday during the Summer Budget. He said it will see wages hit £9 per hour by 2020 for over-25s. The Low Pay Commission will advise on the rates, which will start at £7.20 in April 2016.
Mike Holling, executive director of the Craft Bakers’ Association, said he felt it was a “common sense budget”, but raised a few concerns about the detail of the wage proposals.
“From our members’ point of view we will need to look at the details, such as the age levels being introduced. At the moment, 21 is the full rate for the minimum working wage.
“It is legislation and we will have to work with it. Realistically it will add costs to businesses that they will have to absorb.”
Alan Clarke chief executive of Scottish Bakers, agreed the NLW could have a dramatic increase on business costs.
“The new NLW offers people currently on the Minimum Wage a pay rise of almost 11% between now and 1 April 2016. This will have a major impact on sectors where employees have low skills and it also puts pressure on wage differentials between low-skilled and skilled employees.”
He predicted this could have a major impact on recruitment and there would be potential redundancies as bakers try and keep wages costs within acceptable levels.
He added: “There is no instant recipe to make workers more productive and the size of the bakery market remains the same. As usual, bakers will have to manage their business within an acceptable level of overall costs, otherwise there will be no business and this could create additional job losses.”
The Federation of Small Businesses (FSB) is also worried about the moves and described the budget as “a mixed bag” for small businesses.
John Allan, national chairman of the FSB said: “The introduction of a new National Living Wage for over 25 year olds, set at £7.20 an hour from next April, will pose significant challenges for many small firms, particularly
those in the hospitality, retail and social care sectors.
Ufi Ibrahim, chief executive of The British Hospitality Association, said: "Hospitality and tourism created one in five jobs in the last Parliament and is the fourth biggest industry in employment terms but there is more we can achieve with further support from the Chancellor. As an industry employing a large number of individuals earning more than national minimum wage and less than the proposed living wage, we have tried to have a constructive dialogue with HM Treasury on building towards the living wage without job losses.
"We were very surprised the Chancellor made this announcement without consultation. Despite the Chancellor trying to alleviate the pain with adjustments to corporation tax and employment allowances, these changes do not go far enough to reduce the impact on SMEs and mitigate potential job losses across the industry."
The Food and Drink Federation, however, supported the change. Ian Wright, director general, said: “We support the national living wage in principle and many of our leading members have already made individual commitments to pay the living wage.
"It is important, however that the direct impact on the thousands of small and medium-sized food businesses is minimised to ensure the future competitiveness of the food and drink manufacturing sector. The counterbalance of a reduction in corporation tax and National Insurance contributions will go some way in helping food and drink manufacturers to manage this change.”