Employers respond to National Living Wage by raising prices or reducing profits

  25th July 2016      
 Employment, Accounting & Finance, CIPD, Executive Search, Human Resources, IT & Software Solutions, Office & Commercial, Recruitment


According to a report published by the Resolution Foundation employers have responded to the National Living Wage (NLW) by raising prices or reducing profits rather than cutting jobs, but many will still look at enforcing further productivity-enhancing measures in the coming years.

The report considers both the initial impact of the NLW and its longer term prospects in the wake of the UK’s decision to leave the European Union.

The survey of 500 businesses, was conducted before the referendum and found that 35% of businesses say the NLW has increased their wage bill this year. A further 16% of companies expect the NLW to increase their wage bill at some point in the future.

Of those companies affected by the NLW, the most common short-term action taken has been to increase prices (36%), followed by taking lower profits (29%).

The report also revealed that around one in seven companies have already invested more in training and one in eight have invested more in technology.

Conor D’Arcy, Policy Analyst at the Resolution Foundation, said:

“The National Living Wage has already delivered a welcome pay boost to millions of workers, the big question has been how employers would respond. The evidence so far is that firms have absorbed some of the impact on their wage bill, while passing on a share of those rising costs to consumers through higher prices.”

“Encouragingly, evidence of workers seeing their hours cut or even losing their jobs has so far been relatively limited, the challenge now is for firms to continue to respond positively to the National Living Wage, particularly by raising productivity.”



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