54% of Firms Fear Impact of NLW

54% of Firms Fear Impact of NLW

But businesses plan to boost efficiency to pay for National Living Wage

20th November 2015

By Elma Glasgow

Next week George Osborne will deliver the Autumn Statement, but businesses are still reeling from the announcement of the new National Living Wage (NLW) in July. More than half of businesses feel they'll be impacted by the rise in costs, although the government has promised help in the form of corporation tax cuts and more.

Employers will be expected to pay over-25s a minimum of £9 per hour by 2020. The NLW will be phased in with the first rise to £7.20 coming in April 2016 .

Impact on wage bill

From the 1,037 businesses recently surveyed by the Chartered Institute of Personnel and Development (CIPD) and the Resolution Foundation (RF), more than half (54%) say the NWL will affect their wage bill. Also almost 2 in 10 are expecting to be affected by a large extent.

The retail and hospitality sectors seem to be impacted the most – the figure rises to 33% and 32% respectively. More than two-thirds of employers in healthcare also expect to be hit.

Taking action

30% of employers plan to improve efficiency and productivity to deal with the wage rise, while 16% will slash bonuses and overtime. Around 2 in 10 will take lower profits and absorb costs and 15% will up their prices.

Other employers plan redundancies, hire more under-25s and apprentices, and cancel or scale down plans for investing or expansion.


Mark Beatson, the CIPD's Chief Economist, calls the NWL a "bombshell" for employers. In response to 28% saying that tax cuts and National Insurance Contributions may help offset some of the additional wage costs, he says:

If the Chancellor wants to provide any more support for businesses grappling with the National Living Wage in the Autumn Statement, it might be better delivered through enhanced business support or special help for the care sector rather than shaving small amounts off general business taxation.”

Mark Beatson, CIPD

SMEs are also worried about rising in staff costs – 77% believe the NWL harm their ability to recruit and grow.