As Britons go to the polls today, experts have warned that operators in the hospitality industry face accelerated wage inflation pressures.
According to software provider Fourth, the hourly pay of workers in the UK hospitality industry continues to outstrip the National Living Wage (NLW), with the hourly rate currently sitting at £8.12 – 62p higher than the new NLW threshold for over 25s, introduced in April 2017.
The headline statistic represents all age cohorts, when U25s are stripped out the average hourly wage rises to £8.26.
This number has been mined from Fourth Analytics data on the hourly pay of thousands of hospitality workers and is blended across the hotel, restaurant, QSR and pub sectors.
The extent of wage inflation over the next five years will be heavily determined by how votes are cast today given the differing policies of the two main parties.
In its manifesto, the Conservative party has pledged to raise the NLW for workers aged over 25 to 60% of median earnings, while Labour has pledged to raise the NMW to £10 an hour for all workers aged 18 and over by 2020.
Figures from the Institute of Fiscal Studies (IFS) paint a bleak picture for all UK employers, stipulating that the Conservatives’ policy would affect 2.8 million workers and raise the cost of employing them by 4% on average, costing employers £1 billion per annum.
On the other hand, Labour’s policy would affect 7.1 million workers and raise the cost of employing them by almost 15% or £14 billion per annum.
Mike Shipley, analytics and insight solutions director at Fourth, said that regardless of the election result, the hospitality industry will continue to face increasing wage cost pressures – the only question being how great they will be.
“Considering we’re currently paying on average wages 8.5% higher than the NLW, the average hourly rate could reach £10.85 or more by 2020. Crucially, as well as the differences in headline wage rates, the differing proposed treatment of minimum wage rates for those aged between 18-25 by the two main parties will also materially affect the overall cost burden to the industry,” he said.
“In the face of this, and the impending possibility of a hard Brexit which would shrink the talent pool further, operators will either need to improve efficiency or reduce employee numbers to balance the books.
“To combat this era of aggressive labour inflation without cutting staff, many of our clients are engaged in productivity programmes and initiatives, such as smarter rota scheduling to improve both sales and service levels, as well as driving the amount of revenue taken per worker / per labour hour.”
The regional pay gap, which had reduced to 10p in January 2017, has now risen slightly to 13p, with areas inside the M25 paid £8.19 on average and areas outside paid £8.06.
Shipley added: “This suggests that the supply of labour in London is starting to decrease, and employers are having to pay a premium in order to compete for the best staff. With its larger reliance on non-UK workers, supply looks set to drop further following Brexit, which could further exacerbate wage rate inflation. This is particularly important in context with the higher costs of living in the Capital, as well as further competition from the increasing number of retailers now paying the Living Wage Foundation’s voluntary ‘London Living Wage’ of £9.75.”