What are Retail and Hospitality Employers planning to pay their front line team from April?

Reward Heads have just been carrying out a brief pay survey with our Retail and Hospitality group to give us all a view on the market for pay reviews at this time of high pay inflation and cost of living inflation, and in the context of steeply rising legislatively-required wage floors.

These organisations cover a huge number of UK employees typically at or close to National Living Wage.

With the increase of the NLW to ￡11.44 in April, and this now applying to those age 21 and above rather than 23 and above, we asked what they were planning to pay for front-line roles, that is the lowest paid ones in store or at site i.e. what is the entry rate for a new joiner.

39% said the NLW of ￡11.44. ?This is a significant risk from an NMW compliance perspective as it allows no salary sacrifice, no time worked but not paid, without rigorous checking and topping up in the following pay period. But it is entirely understandable with the steep increase in NLW again this year.

29% said the Living Wage of ￡12, with one further retailer offering ￡12.08. Not all will be accredited to the Living Wage Foundation but many see this as a goal rate. None of the hospitality businesses were offering this.

There were a wide range of entries between these two points. This is likely to give some headroom for extra time worked, for salary sacrifice, and not to be seen as a minimum wage employer. The mean rate was ￡11.44 and the median ￡11.62, although these are not very meaningful numbers with 68% planning two distinct and different pay points.

This is a very different pattern to what we have seen in the past – the Living Wage has not been nearly as common, and even now is generally not because the businesses are accredited but more that they are striving for this rate.

We were seeing a trend towards the NLW with its steep increases and approaching the Living Wage – there is still a 56p gap but this is now less than 5%. If inflation continues to fall back to the 2-3% level that is predicted, we can expect a much smaller rise in Living Wage at the end of 2024. With pay rises generally lagging inflation by 6 months, and the Government commitment that NLW will be 2/3 of median earnings, as the ￡11.44 achieved, we may well still see a higher increase than inflation here to keep up with that goal. It is going to be another interesting year for the Low Pay Commission in making their recommendations.

We also asked if employers were using age related pay ie the lower NMW rates for those under 21. ?21% said that they did. This feels higher than we have seen in recent times and may be with the large step up now at age 21 (NMW for age 18-20 moving to ￡8.60 hence to pay this group at NLW would be an increase of 33%, and for those under 18 with a NMW of ￡6.40 it would be 79%). There was no meaningful difference between retail and hospitality.

If you would like to take part in similar surveys and be part of our Retail and Hospitality Forum, please email [email protected].