The founder of a Glasgow-based recruitment agency for the food and drink and hospitality industries has warned that businesses need to adopt a “flexible labour mode” ahead of the National Living Wage (NLW).
EasyRecruitUK’s Derek Ferrol declared that food and drink firms faced “losing control of labour costs” under the new legislation, which comes into force on 1 April 2016 and will initially pay workers aged 25 £7.20 an hour.
“The impact of the National Living Wage could take us back to the dark days of the 1970 and ’80s,” Ferrol insisted. “As the unions pushed for improved working conditions and better pay, the UK struggled to perform in the global manufacturing market. The foundation of any sustainable business, quite simply, requires a flexible cost base - one that is not fixed, rigid or beyond the control of the business.”
Last week the Department for Business, Innovation and Skills (BIS) urged employers to prepare for the NLW after a survey it commissioned of 1,000 UK businesses revealed that only 45% of employers had updated their payrolls. The findings also showed that only 39% had communicated the upcoming changes to staff.
BIS called on employers to adopt a four-point plan to prepare for the changes: find out the correct rate of pay; determine who will be eligible for the pay rise; update the payroll in time for 1 April; and inform staff as soon as possible.
“I have no doubt that many businesses will consider the option to reposition their operations outside the UK, not because they cannot afford to pay the National Living Wage, but because losing control of labour costs makes their business unsustainable,” Ferrol added.
“In order to limit the impact of the National Living Wage, they need to consider moving to a ‘flexible labour’ model. Not only will greater flexibility make an organisation more resilient and progressive in challenging times, but it will also make you a better employer.”