National living wage will cost – but there will also be positives

With less than four weeks to go until the national living wage kicks in, sceptics are dusting off their dire predictions once again.

Recruitment experts Manpower kicked off proceedings this week with warnings that employers are set to cut overtime pay and slash weekend rates to claw back the cost of the new £7.20 hourly wage for workers over 25. Recruitment will be scaled back to make way for increasing automation, chimed in the Recruitment & Employment Confederation. These followed threats from the BRC days earlier that the pay rise would shut more than a quarter of shops and lead to the loss of nearly a million retail jobs in the next decade.

All of which will make particularly dismal reading for fmcg, which hires one of the highest proportions of low-paid workers of any sector and stands to feel the biggest impact.

But this tells only half the story.

Yes, the food & drink industry must ensure it’s prepared. Not least because changing payroll for up to thousands of workers will be a huge ongoing HR exercise. Mistakes could be costly, with non-compliance attracting hefty penalties.

Undoubtedly wage bills will go up, by up to £12.4bn across all UK employers, according to KPMG. Businesses with wafer-thin profit margins will be forced to look for savings elsewhere to balance the books in the short term, while larger fmcg firms could see a temporary dent to their bottom line. For those looking to keep an edge on rivals it won’t be enough to simply push up pay for those on the lowest wages, either. Instead they’ll need to nudge up hourly rates for those on the next rung up to avoid resentment among workers taking on extra responsibility.

But in the longer term there’s plenty of research to suggest fantastic business benefits to paying workers more. Those that have already taken the plunge, paying the higher Living Wage Foundation rate of £8.25 per hour, report reduced staff turnover and absenteeism, higher worker morale and better productivity. All are big potential positives employers, which could offset the initial pay-out.

It’s all too easy to crunch the numbers prior to 1 April and reel off figures that leave industry in despair. More complex and less quantifiable, the positives don’t grab headlines in quite the same way, but that doesn’t mean they won’t be as significant.

The fact is, much like Brexit, any fallout from the NLW is far from certain. Unlike Brexit, however, there’ll be no vote and, like it or not, businesses will need to comply with Osborne’s plan – while attempting to put the negative headlines into perspective as best they can.