On-Demand temps can help your business cover the costs of the minimum wage increase

Tuesday, July 12th, 2016

As of 1st April this year, the national minimum wage, now called the National Living Wage, increased to ￡7.20 for staff aged over 25, 50p an hour more than the previous minimum. It’s a change that has been welcomed by campaigners, who see it as a step towards improving living standards for low-paid workers. But it has caused serious financial headaches for many companies who have seen their direct labour costs abruptly increase with no immediate way to cover any shortfall.

The pain of the transition has been particularly sharp in the hospitality industry, where many businesses run on slim profit margins and rely on a large team of lower paid staff. The leisure and retail industries have also been hard hit.

Research by the Resolution Foundation, a body that analyses living standards in the UK, has found that the National Living Wage will affect 23% of employees in total, nearly a quarter of the average workforce. Many companies are finding that as well as having to increase the salaries of their lowest paid staff, they are also having to increase pay for staff on higher rates to maintain pay grades, making the impact of the change felt company-wide.

A long-term problem for businesses

All businesses are affected by the new rate, whatever their size, and it’s not a problem that’s going to be solved by a temporary fix; another minimum wage increase is expected in April 2017, with other increases to come after that. The current government’s target is to increase the rate to ￡9 per hour by 2020, and even this is far below the minimum living wage that many campaigners are calling to be made law, which is currently set at ￡9.40 an hour in London and ￡8.25 an hour in the rest of the UK.

The consequences of not sticking to the new National Living Wage could be serious, with non-compliant employers risking being heavily fined and named and shamed by HMRC.

Why short-term solutions won’t cut it

Businesses are already having to adapt pay structures and working practices to accommodate the new rates, with many cutting pay for younger workers (those under 25 are only entitled to a lower rate), reducing overtime and stopping bonuses. This might help direct labour costs in the short term, but in the long term these are not ideal solutions, often resulting in an unhappy workforce, resentment, lack of motivation and a high staff turn over.

Businesses are also being forced to think carefully about future expansion, as they have to balance the extra cost of taking on new employees against the value of taking on new business and orders.

How on-demand temporary staffing can help

A long-term solution to the costs associated with the minimum wage increase for hospitality businesses will be the establishment of more efficient staffing models that cut out waste and increase the productivity of existing staff. Rather than over-staffing to cover peak periods of demand or risking understaffing to cut the wages bill, businesses will need to become more flexible, reducing their core staffing and using temp staff to cover busy periods.

Catapult is a new kind of staffing platform that links employers looking for short-term staff to temp or season workers seeking positions. Instead of wasting money on labour costs for a full team of permanent staff who may be twiddling their thumbs during quiet times, you can rely on Catapult to help you up-staff on short notice when demand spikes. We can provide temps with as little as an hour’s notice, so you don’t need to worry that you won’t be able to find the cover needed.

If your wage bill this year is causing you to lose sleep, changing your staffing model to rely on temp staffing may be the solution that will save you money and stress.