Almost 90% of the businesses that completed our questionnaire said increases in the Minimum Wage were inhibiting their ability to invest in their businesses, and some fear they will be forced to close entirely.
These are the most disturbing findings of an online survey we launched ahead of the Low Pay Commission’s visit to Cumbria in April.
The Commission – which advises government on the level of the National Minimum Wage and National Living Wage – will be in Kendal as part of a nationwide tour to gauge the impact of the National Living Wage and National Minimum Wage on businesses.
It has asked to meet Cumbria Chamber of Commerce, and we plan to tell the Commission how businesses in the county are affected.
The Chamber’s Chief Executive, Rob Johnston, said: “Our survey reveals that some businesses are already under pressure because of increases in the Minimum Wage, and they are likely to respond to future increases by curtailing recruitment, cutting staff numbers or reducing staff hours.”
It’s not too late to take part in the survey. Click here. The multiple-choice questions only take a couple of minutes to complete.
Rob added: “The nature of surveys is that businesses are more likely to complete them if they are affected directly.
“Almost two-thirds of the businesses that responded to our survey said that 20% or more of their employees were paid the legal minimum. That’s way higher than the national average of 6.8%.
“So while the sample isn’t representative of all businesses, it demonstrates that some are really struggling and, if the Government continues to impose above-inflation increases, jobs will be lost.
“The Minimum Wage shouldn’t be seen in isolation. The 4.4% increase in April coincides with the doubling of employers’ auto-enrolment pension contributions and the annual index-linked rise in business rates.
We are now at the point where the National Living Wage may put us out of business.
“It’s yet another up-front cost that businesses are expected to absorb.”
The National Minimum Wage was introduced in 1999 at £3.60 an hour. The National Living Wage – which applies to over-25s – was added in 2016.
Increases have outstripped inflation. The arrival of the National Living Wage saw the hourly rate jump from £6.50 to £7.20. It could hit £9 by 2020.
This is a big concern for some businesses.
One told us: “I do genuinely care about my wonderful employees. I have supported increases in the Minimum Wage but the scale of increases talked about terrifies me. Our business couldn’t sustain it. Times are very hard.”
Another said: “We are now at the point where the National Living Wage may put us out of business.”
And another: “The gap between success and failure is narrowing all the time and we at a point where, with the planned increases, we don’t see ourselves in business in five years’ time.”
When we asked businesses how they had responded to previous increases, 16% said they had reduced staff hours, 20% had reduced employee numbers, 28% had frozen recruitment, and 4% had curtailed staff perks or benefits.
Several cited the pressure on pay differentials when the lowest-paid staff receive above-inflation increases.
With the planned increases, we don’t see ourselves in business in five years’ time.
One business told us: “This has caused a great deal of anxiety in the workplace as the pay gap between low skilled manual workers narrows with supervisors and staff with more responsibility.
“It has caused a ripple of higher pay awards up the ladder and is now in danger of making the business not viable.”
Another said: “We have always paid over the Minimum Wage but, as it has gone up, staff have seen the differential between their wage and the minimum reduce, which has caused conflict. Some have left to make a point.”
A hospitality business told us: “Totally agree with fair pay for working but when the minimum goes up everyone else above wants the same. We are not getting the increase in room rates to compensate for the cost increases.”
More than 88% of respondents said that, rather than prompting them to invest to boost productivity, increases in the Minimum Wage diverted free cash into paying salaries and that meant they had less to invest in their businesses.
The Low Pay Commission is consulting on proposals to boost the pay of younger workers to narrow the differential with over-25s.
Were that to happen, 36% of businesses said they would employ fewer young people and 32% said they would reduce the hours of younger employees.
The Low Commission is also seeking businesses’ views on a proposal in the Taylor Review to introduce a higher Minimum Wage for employees on zero-hours’ contracts, to compensate them for not having regular hours.
A hefty 76% of businesses opposed this.
But not all were hostile to the idea of above-inflation increases in the Minimum Wage.
One said: “It should be higher. It’s not a living wage. As well as being an employer I am also a parent, so I see how hard it is to find decently-paid work.”
We received responses across all six districts of Cumbria, although almost half were from South Lakeland, which has a high proportion of workers on the legal minimum.
There was also a bias towards the service sector – only 12% of those completing the survey were manufacturing businesses.
The annual increases in the National Living Wage and National Minimum Wage apply from this Sunday, April 1.
The hourly rate for over-25s goes up from £7.50 to £7.83. The rate for 21-to-24-year olds rises from £7.05 to £7.38, that for 18-to-20-year olds from £5.60 to £5.90 and that for 16 and 17-year olds from £4.05 to £4.20. The apprentice rate increases from £3.50 to £3.70.