The hourly pay of workers in the UK hospitality industry continues to outstrip the National Living Wage (NLW), new research from Fourth has revealed.
The hourly rate is currently £8.12 – 62p higher than the new NLW threshold for over 25’s, introduced in April 2017.
The findings come as the country goes to the polls to choose between two main parties which have widely differing policies on minimum pay.
The Conservative party has pledged to raise the NLW for workers aged over 25 to 60% of median earnings, while Labour has pledged to raise the NMW to £10 an hour for all workers aged 18 and over by 2020
The IFS say the Conservative pledge would equate to £8.75 and affect 2.8m workers in the whole economy, hit net profits by 1% and cost £1bn. For hospitality sector this would be £100m.
Labour’s policy would see the national minimum wage rise to £10 for anyone over 18. The IFS says they would equate to £9.41 and would affect 7.1m workers, hit 4% of profits and cost £14bn across whole economy, meaning a hospitality cost of £1.4bn.
The findings also show U21s in the hospitality industry are currently paid on average £7.17 – £1.57 more than the NMW for their age group.
Wage parity is becoming increasingly common, with the rate for U21s consistently tracking the increases to the wage rate for over 25s since the introduction of the NLW.
Between 2014 to 2017, labour costs have risen as a percentage of sales from 27.3% to 28.1%, though during the period, sales achieved per worker per labour hour rose by 10% from £31.94 to £35.10.
The regional pay gap, which had reduced to 10p in January 2017, has now risen slightly to 13p, with areas inside the M25 paid £8.19 on average and areas outside paid £8.06.
Mike Shipley, analytics & insight solutions director at Fourth, said: “It is clear that real wages in the hospitality industry continue to outstrip the increasing NLW, as operators compete to retain the best employees in the industry.
“Regardless of the result in tomorrow’s election, it’s evidently clear the hospitality industry will continue to face increasing wage cost pressures, the only question is how great they will be.”
“With the impending possibility of a hard Brexit which would shrink the talent pool further, operators will either need to improve efficiency or reduce employee numbers to balance the books.
“To combat this era of aggressive labour inflation without cutting staff, many of our clients are engaged in productivity programmes and initiatives, such as smarter rota scheduling to improve both sales and service levels, as well as driving the amount of revenue taken per worker / per labour hour.”
Shipley added the regional pay gap data showed the supply of labour in London was starting to decrease, and employers are having to pay a premium in order to compete for the best staff.
He said: “With its larger reliance on non-UK workers, supply looks set to drop further following Brexit, which could further exacerbate wage rate inflation.
“This is particularly important in context with the higher costs of living in the Capital, as well as further competition from the increasing number of retailers now paying the Living Wage Foundation’s voluntary ‘London Living Wage’ of £9.75.”
Shipley added: “We are seeing an unprecedented level of external influences hitting the sector, I’ve never seen anything like it.
“As individual businesses there’s very little we can do about it, so we need to start thinking about what we can do within our control to mitigate these costs
“These pressures are relentless and will keep going up.”
