The cost of the National Living Wage is stacking up rapidly.
Morrisons has today admitted that the introduction of the government-imposed measure next year is going cost the supermarket group “10s of millions of pounds” on top of the costs the business is already battling with to turn itself around.
From April next year, businesses will be required to pay £7.20 per hour to workers over the age of 25, rising to £9 by 2020, after changes announced in the chancellor George Osborne’s Budget in July.
The new rate will replace the national minimum wage, which stands at £6.50 per hour for over 21-year-olds.
Speaking at the company’s half-year results presentation in the City today, chief executive David Potts said: “We’ll have to figure out how we move to £9 by 2020 and the stops along the way.
“I see this as an opportunity to recognise the people who work on the frontline of the business ... but it also means that our efforts on improving productivity become more important."
The retailer, which employs around 119,000 staff, has joined a rapidly growing number of retail and leisure businesses that have voiced their concerns this week. Hotels, restaurants and retailers as well as care homes employ the largest proportion of sub-living wage workers are the most exposed to the wage hike.
Fashion retailer Next warned that implementing the National Living Wage will cost the business £27m each year from 2016 until the end of the decade. Next year's increase will cost the business just £2m but thereafter the increases will be much higher, taking the total wage bill to £147m by 2020.
On Monday Costa Coffee and Premier Inn owner Whitbread warned it may have to raise some of its prices saying its costs could amount to £20m.
Even John Lewis Partnership will be affected, although chairman Sir Charlie Mayfield earlier today said that the impact would be “very modest” because the majority of the partnership’s staff are above the limit already.
However he said that it was “too soon to tell” what the long-term impact might be.
“What you are beginning to see is the different dimensions of [living wage] debate. It may have an impact on pricing and productivity but for us our focus is to pay people as much as we can based on their performance, and living wage adds further impetus to that strategy,” he said.