Mixed response to minimum wage increase

Photo: DANIEL SORABJI/AFP/Getty Images

The government’s announcement on 2021 wage rates has been received with mixed reactions from the trade bodies of local shops.

Chancellor Rishi Sunak, in his Spending Review, confirmed the government’s decision to accept the Low Pay Commission’s (LPC) recommendations in full for wage increases in 2021.

This would mean a 2.2 per cent increase in National Living Wage (NLW) rate to £8.91 per hour. The NLW will also apply for all workers aged 23 and over, from the current 25.

The Association of Convenience Stores (ACS) has welcomed the ‘restraint’ in the increase in NLW – last year the wage rate increased by 6.2 percent to the present £8.72 – as a measure that will help retailers keep more colleagues employed.

“These are extraordinary and challenging times for businesses. Wage costs remain the biggest cost in a convenience store business, so a more restrained National Living Wage Increase will help struggling businesses to keep more colleagues employed rather than having to plan a cut in hours or headcount,” James Lowman, chief executive of the ACS, said.

The Federation of Independent Retailers (NFRN), however, warned that the increase will have a negative impact on thousands of small businesses.

“We would all like to pay our staff more, but the headline increase in the wage rate does not include the increase in national insurance and pension contributions that employers also have to pay,” Stuart Reddish, NFRN national president, noted.

“Given that many of the items on sale in our 11,000 members’ stores – particularly newspapers and magazines – are price marked, retailers are unable to increase prices to cover these additional payrolls costs.”

With many independent retailers reducing staff levels and hours and increasingly taking on more of the work themselves due to the COVID-19 pandemic, the rise in wage rates will only make matters worse, Reddish contended.

“At a time when small businesses need help and support more than ever, this move by the government feels like a kick in the teeth for those that are already struggling to survive,” he added.

The 2020 National Living Wage rate increase has resulted in convenience retailers increasing the hours worked in the business (64%), taking lower profits from the business (56%) and reducing staffed working hours (48%), according to written evidence submitted to the LPC by ACS earlier this year.

“Our research into the working lives of the 412,000 colleagues in convenience demonstrates how important the local, flexible and secure jobs that stores provide are, and we will continue to work closely with Government and the Low Pay Commission to detail the impact of rising wages on the convenience sector and the uneven impact of Covid-19 this year,” Lowman said.