Evidence call when setting Living Wage

The British Chambers of Commerce (BCC) has published survey results showing that a third of companies (34%) have had to increase their wage bills since the introduction of the National Living Wage (NLW) in April 2016.

The survey of more than 1,600 business leaders across the UK, undertaken in August 2016 and supported by Middlesex University, revealed that many companies affected by the introduction of the NLW have already changed their recruitment plans or planned to do so in the future. A quarter of affected firms (25%) have reduced recruitment in response, and 34% plan to do so if the NLW rises to £9 per hour by 2020. Others are looking at changes to staff hours, benefits or pay growth.

These changes reflect the rising cost burden on many companies. Although the majority (65%) of firms pay their staff above the NLW of £7.20 per hour and have not been affected, 25% of those that were affected have increased their wage bill slightly, and 9% have increased their wage bill significantly.

The businesses most exposed to the NLW have largely absorbed the increase in costs for now, but plan to pursue cost reduction measures if the NLW increases to £9 per hour. The BCC urges the government to use caution with future NLW increases.

Key findings in the survey:

  • Most businesses pay their staff above the NLW, but more than a third have increased their wage bills since it was introduced in April 2016
  • Of the firms whose wage bill increased because of the NLW, most have not yet made major changes, but more of these firms expect to do so if the NLW rises to £9 by 2020
  • Only 34% of businesses affected by the NLW raised prices to offset the cost, but 63% would do so if it rose to £9 by 2020
  • Of the businesses affected by the introduction of the NLW, 25% reduced recruitment in response, 18% reduced staff hours, 18% reduced pay growth, 24% reduced staff benefits, 25% reduced recruitment, and 37% made no changes
  • If the NLW increases to £9 per hour by 2020, 25% would reduce staff hours, 29% would reduce pay growth, 33% would reduce staff benefits, 34% would reduce recruitment, and 13% would make no changes         

Commenting, Marcus Mason, Head of Education and Skills at the BCC, said:

“A decent wage can make a huge impact on employees’ lives and their performance at work, and most businesses are able to pay above the NLW.

“However, a significant number of firms have already had to re-balance their books to meet the cost of the NLW, which can have a knock-on effect on recruitment or growth plans. Many firms would have to change their business models, by increasing prices and reducing staff, if the NLW increases to £9 per hour by 2020.

“The government needs to take an evidence-based approach to setting the NLW. The rate should be set by the Low Pay Commission and be determined by the state of the economy, weighing up the various pressures businesses face. Further NLW increases need to be proportionate, reflecting business uncertainty, slowing growth and high input costs, to avoid having a negative effect on employment.”


Notes to editors:

The BCC surveyed 1,627 businesses between August 1-15.

The British Chambers of Commerce (BCC) sits at the heart of a powerful network of 52 Accredited Chambers of Commerce across the UK, representing thousands of businesses of all sizes and within all sectors. Our Global Business Network connects exporters with nearly 40 markets around the world. For more information, visit: www.britishchambers.org.uk