Headlines: November 18th, 2015

The introduction of the new National Living Wage in April 2016 will result in a higher level of job cuts in the public sector compared to other areas of employment. This is a key finding from a new survey published by the CIPD, the professional body for HR and people development, and the Resolution Foundation.

Over half of all employers say the National Living Wage will have an effect on their wage bill. Retail and hospitality are set to be hit hardest as more than half of all employers expect to be affected.
In addition, more than two-thirds of employers in the healthcare sector will also be affected.

Although the impact on the public sector is not as great, the CIPD survey found that a higher proportion of public sector employers (21%) say they plan to cut the size of their workforce as a result of the introduction of the National Living Wage than private sector employers (13%).

The survey asked employers about the three most important things they intend to do in response to the National Living Wage. Almost 30 percent of employers said they intend to manage these higher costs by improving efficiency and productivity. Over 20 percent said taking lower profits or absorbing costs and a similar percentage said they would reduce overtime and bonuses. Only 15 percent said they would reduce the number of employees through redundancies or slower recruitment.

Mark Beatson, Chief Economist at the CIPD, said: “The National Living Wage was a bombshell for most employers when it was announced in July. It comes into force next April, which does not give employers a lot of time to prepare. Hence we found 26% of employers in September saying it was still too soon to say how they would manage the cost implications”.