Employers scaling back recruitment in bid to mitigate future wage hikes, says survey
Employers are already scaling back recruitment plans in a bid to mitigate the looming “shockwave” of the national living wage (NLW), a survey has revealed.
Research with 2,101 UK employers by Manpower found that optimism among recruiters was at its lowest level for three years indicating that concerns about the cost of the new NLW had dampened hiring intentions.
Announced in the Chancellor’s summer Budget, the NLW will compel employers to pay workers aged over 25 £7.20 an hour from April 2016, rising to £9 an hour by 2020. The policy is expected boost pay for six million people.
However, the Manpower Employment Outlook Survey showed that after three consecutive quarters at +6 per cent, plans to recruit more staff in the run up to Christmas were “dwindling” having reached their weakest point since the final quarter of 2012.
“The NLW is sending shockwaves through the UK labour market,” said James Hick, ManpowerGroup Solutions UK managing director, as he pointed to financial costs already causing concerns for support services firm Interserve and social care company Mears Group.
Interserve chief executive Adrian Ringrose said that the additional wage costs for its 15,000 cleaners could amount to as much as £15 million, which is estimated to be 12 per cent of its annual profits. While Mears Group suggested the increase would raise its wage bill by £5 million for its 4,000 affected care workers, a sum estimated to be equivalent to 10 per cent of its annual profits.
“Faced with a wage bill of this size, some employers are thinking twice about taking on new workers,” he said.
Hick added: "An unintended consequence of the introduction of the NLW is that firms might try to bypass the legislation altogether. We anticipate that some employers may look to mitigate the extra costs by taking on more younger or self-employed workers, who are not entitled to the NLW.
"While on the surface this could be good news for youth unemployment, which currently stands at 16 per cent, it could push a greater proportion of young people into low skilled jobs, resulting in an influx of less experienced workers into social care and other sectors hardest hit by the new legislation. Meanwhile, candidates under the age of 25 have been asking us why it is they will be paid less despite doing equal work.”
Last July, the Local Government Association warned that the change would cost council employers as much as £1 billion by the end of the decade. And the Office for Budget Responsibility estimates that the extra costs across all employers could lead to as many as 60,000 job losses.