Food firms told: ‘Plan now for national living wage’

The national living wage, to be paid to workers aged 25 and above, will initially be set at £7.20 an hour but is expected to exceed £9 an hour by 2020. From April 2016, workers over 25, who currently earn the national minimum wage, will get 70p an hour more than the current rate.

But within five years, someone aged over 25, working 35 hours a week and previously earning a minimum wage of £6.70, will see their wages rise by about £4,000 a year.

The uplift is predicted to boost the wages of 6M workers, but the Office for Budget Responsibility has warned 60,000 people will lose their jobs as a result of the changes, according to the Glasgow-based EasyRecruitUK.

Dark days of the 1970 and ’80s​

Derek Ferrol, from EasyRecruitUK, said: “The impact of the national living wage could take us back to the dark days of the 1970s and ’80s. As the unions pushed for improved working conditions and better pay, the UK struggled to perform in the global manufacturing market.” ​

In reality, the foundation of any sustainable business required a flexible cost base – one that was not fixed, rigid or beyond the control of the business, said Ferrol.

“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.”​

In order to minimise the impact of the new legislation, employers should “consider moving to a ‘flexible labour’ model”,​ said Ferrol.

“Not only will greater flexibility make an organisation more resilient and progressive in challenging times, but it will also make you a better employer.”​

The sectors likely to bear the biggest impact of the changes were likely to be food and drink, hospitality and cleaning, he said.

Meanwhile, the national living wage might make the humble strawberry unaffordable for some shoppers, the National Farmers Union (NFU) has warned.

Impact on labour-intensive crops​

NFU horticulture and potatoes vice chair Ali Capper said that while the union supported the idea of a living wage for all workers in agriculture, the government should recognise the impact on labour-intensive crops, such as hand-picked fruit and vegetables, where labour costs could be up to 70% of turnover.

“We need government’s help to mitigate some of the immediate impacts, or our businesses will fail,”​ warned Capper.

“We are also urging the food supply chain and retailers to consider national living wage costs, so that British farm businesses can continue to supply high quality affordable food to British consumers.”​

The national living wage will increase the cost of seasonal wages for grower businesses by 35% between 2016 and 2021, calculated the NFU. That was the equivalent to an average annual wage inflation of just under 7% a year, significantly more than the 2.5% annual rate of wage inflation growers expected to take place over the next few years.

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