Retailers face £25.6m in extra costs from National Living Wage - PwC

Lauren Fedor
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Morrisons has promised to pay its staff the National Living Wage. (Source: Getty)

Large retailers could see their wage bills increase, on average, by £25.6m by 2020 due to the new National Living Wage (NLW), according to a new report out today from PwC.

PwC polled more than 100 businesses with an average of 11,000 employees, finding that firms expect to pay, on average, an extra £1.6m in wages next year, and up to £11m more by 2020.

Chancellor George Osborne announced the NLW at the emergency summer budget in July, saying the national minimum wage would rise next year to £7.20 per hour for workers over the age of 25. The NLW is expected to increase incrementally, topping out at £9 per hour by 2020.

PwC said that retailers expected to take the hardest hit, both next year and over the next five years, with their average wage bills increasing by £3.8m in 2016 and £25.6m by 2020.

Healthcare firms reported that their average wage bills would go up by £2.5m next year and £14.3m by 2020, compared to hospitality and leisure companies, which expected costs to rise by £2.2m next year and £13.2m by the end of the decade.

Among all of the employers surveyed, nearly a quarter of their workforce are currently paid less than £7.20 an hour. Nearly four in ten employees are currently paid less than £9 an hour, the 2020 target.

Commenting on the findings, John Harding, an employment tax partner at PwC said: “Businesses have been given time to prepare for these changes and should be using this as an opportunity to introduce wider workforce interventions and technology to improve productivity, rather than defaulting to passing the costs on to consumers.”

“While many employers should be able to afford the increase to their wage bill, the disproportionate impact on sectors employing a large number of lower paid workers such as retail, transport and logistics, healthcare and hospitality and leisure can’t be ignored. Organisations must have a plan to deal with these costs, that isn’t simply passing them on to consumers or reducing headcount,” he added.

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