The government must get its house in order before further increases to the National Living Wage (NLW) continue. This is the message from wholesalers feeling the pinch as the latest rise came into effect this month.
While many employers in the sector want to pay their staff fairly for the work they do, April’s rise of 4.9% to £8.21 for workers aged 25 and over, and above inflation and average earnings rates for younger workers, has come at a time when there is greater uncertainty in the market than ever before.
Looking ahead to 2020, the government’s aim is for the NLW to reach 60% of median UK earnings, taking it to at least £9 per hour for those aged 25 and above.
Matthew Moare, operations coordinator at confectionery wholesaler Kentish Match, says this year is the toughest he’s ever experienced in wholesale, and the government must end the uncertainty over Brexit before any further increases take place.
“Wage increases are positive, but it’s a hard balancing act for small companies. We want to retain good staff, because hiring is expensive, but we’ve had to cut hours down and find ways of selling more. It’s a catch-22 because there’s not the footfall going into shops,” says Moare.
It’s a view echoed by the Federation of Wholesale Distributors, which says that while its members support provision of a NLW and minimum wage standard, it believes increases will impact the food and drink wholesale sector’s ability to both create and sustain employment.
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“Our members are concerned that the NLW has risen at a level significantly above inflation in recent years. This has added to the cost base of our members. Moreover, due to competition it will be difficult to pass costs onto customers,” says chief executive James Bielby.
Furthermore, if the labour market were to be restricted by Brexit, this could lead to further pressure on wages, one knock-on effect being more staff cuts.
With the country lurching deeper into crisis, coupled by the likelihood of food inflation, margins are being further squeezed. To absorb the changes, wholesalers like Kentish Match are juggling staff hours, considering further automation and focusing on innovation.
Other wholesalers are seeing some potential benefits. For example, JW Filshill in Glasgow sees an opportunity to attract a broader customer base seeking delivered capability to offset its rising wages. As the rise will be across every sector, retailers may have less staff available for picking up stock.
Filshill pays according to productivity, meaning that, as wages rise, workers are encouraged to increase output. Other wholesalers are also investing in technology as a way of increasing efficiency.
But it is worker confidence that may suffer the most while employers grapple with increases. At Kentish Match, the Christmas bonus has already been reduced and, at other companies, staff benefits are being pared back.
“We are loath to reduce anything, but are open with the staff so they understand the pressures. We’re clear that when improvements happen there will be an option to increase hours, and we’ll reinstate benefits,” says Moare.