Its time for the Living Wage to be introduced, there is no way of getting round it. How will it affect the small business we will have to wait and see but it does have potentially costly effects on every business irrespective of industry.
So lets look at some of the detail…
If I look at one of my clients who operates a modest 50 cover bistro. The direct cost to her operation with the new living wage being in affect is £11,000 per annum. With a business that generates a £25,000 net profit, almost 50% of this will now be absorbed with the pay increase. Despite the increase only being available to over 25 year old employees, the general consensus is that every staff member will in turn be issued with the relevant increase in pay. This then opens up the argument regarding salaried members of staff, are they eligible also for an increase in pay?
The impact and solutions…
We are then faced with the conversation about hospitality businesses introducing the increase but then reducing the number of hours allocated to a specific task which in turn may make the employee worse off per week or businesses only looking to employee younger and more inexperienced staff which in turn leads to complaints. Time for TripAdvisor to have a field day. There will be many businesses who will now have to review service style, for example table service may have to be replaced with counter service so that the business can operate with one member less and therefore absorbing the cost of the living wage increase.
The idea behind the living wage is to make things better, a more fair society, but is it fair if staff have the potential now to loose their jobs?
This is serious stuff.
It is obvious that businesses will directly have to increase prices but to what point will people be prepared to pay for a product or service before they just say ‘lets not bother’ and do without. A great example of this is the smaller privately owned coffee shop. How much can they increase a cup or pot of tea before the client does without?
This will certainly make for interesting times ahead.
If you have concerns with the increased living wage and you are looking for ways in how to adapt your business to support this then get in touch with us today. We are a reputable hospitality and catering consultancy and are here to help!