Firms plan to trim hiring as living wage costs rise

More than a third of businesses have had to increase their wage bills since the introduction of the national living wage in April, a new report out today says.

The British Chambers of Commerce said many firms would have to cut staff as the living wage rises. Picture: John Devlin

The survey of more than 1,600 business leaders in the UK by the British Chambers of Commerce (BCC) shows “that many companies affected by the introduction of the national living wage have already changed their recruitment plans or planned to do so in the near future”.

The BCC said 25 per cent of firms affected had cut recruitment in response, and 34 per cent planned to do so if the £7.20 per hour living wage rises to £9 by 2020 as scheduled.

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“Others are looking at changes to staff hours, benefits or pay growth,” the BCC said in the survey, undertaken in August and supported by Middlesex University.

It added that most firms canvassed (65 per cent) paid their staff above the living wage, while 25 per cent of those affected by its introduction had increased their wage bill “slightly”, and 9 per cent had boosted their wage bill “significantly”.

Marcus Mason, head of education and skills at the BCC, said the report showed a significant number of businesses had “had to rebalance their books to meet the cost of the national living wage”.

He added: “Many firms would have to change their business models, by increasing prices and reducing staff, if the national living wage increases to £9 per hour by 2020.”

Mason said that the government needed to take a “proportionate” and “evidence-based” approach in setting the living wage in future, determined by the strength of the economy and other pressures business was facing.