HR · 27 November 2018

Employers forced to lower profits and hike prices to absorb Living Wage rise

As of April 2018 the living wage is 7.83 per hour for those aged 25 and over, and 7.38 for those aged 21£24
Employers have had to accept? lower profits and hike their prices to afford rises in the National Living Wage (NLW), according to a new report.

The changes employers have had to make to their business were revealed in the new Low Pay Commission’s 2018 report.

It found that business owners had decided to take a hit to their profits, raise prices for their customers where possible, restructure workforces and narrow the gaps between pay bands. Employers told the LPC that improving productivity would be the key to managing future cost increases.

However, despite the changes, the LPC’s analysis and research did not find clear evidence of any negative effects on employment from the increased NLW.



Inside story: The National Living Wage impact on small business

Despite largely having been able to meet the challenges posed by the National Living Wage, the impact has been that small business profits have suffered.


The report found that increases to the NLW has raised the pay of up to 5 million workers this year. This, the Commission said, was fewer than in 2017 but still covered a fifth of workers aged 25 and over.

The 4.4% increase in the NLW pushed pay up faster than average not only for those on the rate, but also for the bottom 20% of earners those earning up to 9 per hour.