A new compulsory National Living Wage for workers aged 25 and over will be introduced in April 2016 at £7.20 an hour and reaching £9 an hour by 2020. Employers who do not pay the Compulsory Living Wage are likely to face financial penalties. From April 2016, the National Minimum Wage will only apply to those under the age of 25.
This measure is likely to represent a significant additional cost to hospitality businesses and, in a competitive and cost-conscious marketplace, it will be difficult to pass directly to customers.
Whilst reactions have generally steered clear of outright criticism, therefore, it is clear that there are real concerns.
BHA ‘surprised’ – measures needed to counterbalance the Government’s agenda
Ufi Ibrahim, chief executive of The British Hospitality Association, commented:
“Hospitality and tourism created one in five jobs in the last Parliament and is the fourth biggest industry in employment terms but there is more we can achieve with further support from the Chancellor.
“As an industry employing a large number of individuals earning more than national minimum wage and less than the proposed living wage, we have tried to have a constructive dialogue with HM Treasury on building towards the living wage without job losses. We were very surprised the Chancellor made this announcement without consultation. Despite the Chancellor trying to alleviate the pain with adjustments to corporation tax and employment allowances, these changes do not go far enough to reduce the impact on SMEs and mitigate potential job losses across the industry.
“On top of all these new pressures, our industry is at a serious disadvantage with other European countries where tourism VAT is on average 10%. We call upon the Government to lower VAT on accommodation and attractions to 5% to increase our market’s competitiveness and reduce costs to working families. A cut to tourism VAT could supercharge the economy with over £20 billion in foreign exchange earnings and domestic spending over the next 10 years.
“While we are analysing the potential impact of the Chancellor’s announcement, constructive dialogue with HM Treasury is now imperative to identify measures to counterbalance the Government’s ambitious agenda with the realities of running a high service and very low margin business.”
ALMR: Affordability is key to Living Wage
Responding to the Budget Statement, the ALMR welcomed moves to encourage investment in businesses and urged the Government ensure that debate around the new National Living Wage takes into account overall employment costs.
ALMR Chief Executive Kate Nicholls said: “It is encouraging hearing the Chancellor talk about the need to create more jobs and giving employers greater powers to invest in their staff and businesses – and we are delighted that the Chancellor has responded positively to our calls for a higher Annual Investment Allowance and training tax credit to underpin this. Licensed hospitality has shown how much investment in communities and people it can deliver over recent years and we need to make sure that this can be sustained, not undermined, if we are to play our part in delivering the additional jobs and apprenticeships the Chancellor wants.
“For that reason, we need to make sure that the Government takes into account legitimate business concerns in future discussions regarding the new National Living Wage – and crucially how it will relate to the NMW for younger workers. We need a thoughtful approach that will take into account the amount our workers take home, their total earnings and benefits such as pensions not just the headline hourly rate. We also need some sensitivity surrounding the timetable for introduction, with wage rounds currently planned around April.
“The Chancellor acknowledged that the change would hit employment in certain sectors and we would urge him to go further and faster in introducing changes to National Insurance Contributions for small businesses and in cutting corporation tax. It will be critical for the timings of the changes to be aligned and restricting these changes only to the Employment Allowance will limit the impact. We would like to see the abolition of jobs taxes extended from under 21s to under-25s.
“The Chancellor is right, the best way to help the lower paid workers is to allow them to keep more of the money they earn and the changes announced to Personal Allowance are set to put an extra £900 per year in the pockets of our workforce and consumers. Measures such as these have the dual effect of aiding both businesses and staff and we urge the Government to bear this in mind when he comes to consult on the National Living Wage. Having a higher hourly rate benefits no one if it is at the expense of a job.”
BBPA welcomes tax cuts for business
Brigid Simmonds, Chief Executive of the British Beer & Pub Association, commented on the Summer Budget:
“There are some very welcome measures for beer and pub businesses, with the cut in Corporation Tax, reductions in the cost of Employers National Insurance, and the rise in the Annual Investment Allowance.
“Some of the measures, such as the Living Wage and reductions in tax credits, will have a knock-on effect on the cost of employment for pubs, so the tax cuts announced today are a welcome and necessary balancing measure.
“As well as the tax cuts announced, we will be looking to see that the Government continues to support brewing and pubs in other parts of the tax system, such as through future action on business rates and further cuts in beer duty, which are a big help to pubs.”
CAMRA welcomes Budget supporting small cider makers
“CAMRA is pleased that the Government has committed to support small cider makers and will retain the current duty exemption that was under threat from the European Commission. This exemption has been in place since cider duty was introduced and is absolutely vital to supporting the production and availability of quality real cider.
“Removing the exemption would have imposed a new tax burden of up to £2,700 on Britain’s smallest cider producers, many of whom sell less than £10,000 worth of cider a year.
“This is excellent news for real cider drinkers who were concerned that many small producers would have closed if this exemption were removed. Over 26,000 cider drinkers signed CAMRA’s petition calling on the Government to retain the current duty exemption and so we are delighted that this is exactly what the Chancellor has today announced.”
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