NLW increases 9.8%, but true cost is 11.5%

According to data from S4labour, the 9.8% increase to NLW announced yesterday by the Chancellor will mean an increase of 11.5% to costs for operators when considering the weighted impact of age distribution in the industry.  

The new wage of £11.44 will apply to employees over 23s, who make up 70% of the hospitality workforce, as well as the 9% of workers who are 21 to 22 years old.  

The statistics also reveal that 14% of industry workers fall into the 18 to 20 bracket, with their new wage rising by 14.8% to £8.60. Under 18s, who make up 7% of the industry’s workforce, will see a 21.2% increase in pay. 

Assuming all workers are paid at minimum wage, these increases will bring hourly labour costs up 11.5% for operators.  

Alastair Scott, CEO of S4labour, commented: “The headline rate at 9.8% was going to be tough enough to manage, without factoring in the high proportion of young people working in our industry. This makes it an even bigger challenge, just when we thought we might be able to get back onto an even keel.” 

Autumn 2023: What do the Chancellor’s announcements mean for hospitality?  

Autumn Statement 2023

Chancellor Jeremy Hunt has today released his Autumn Statement, bringing forward measures on NLW, alcohol duty, business rates and NI that will have an impact on the industry and its workers.

The National Living Wage will see an increase of 9.8% to £11.44 an hour, averaging an additional £1800 a year per full-time employee. This new rate now also applies to employees who are 21 and 22 years old – previously, it was only for workers over the age of 23. Though beneficial for the staff, this rise means a typical pub will see labour ratio hike around 3 percentage points. In addition to this increase, employee NI will drop from 12% to 10%, though employer contributions to NI have not been cut.

The extension of business rates relief is good news, and will help around 230,000 smaller retail, hospitality and leisure businesses in 2024-25. It also seems the Chancellor has listened to calls for alcohol duty to be frozen, meaning there is one less cost for operators to worry about until August next year. 

Chief Growth Officer at S4labour, Richard Hartley, commented: “We have spoken to operators who are currently struggling with labour ratios of 34%+, so this further increase in spend will be challenging, and we anticipate this will put pressure on consumer prices. As wages continue to rise, managing the cost is going to be the single-most important factor in the future success of our industry.” 

Ben Hood joins S4labour as non-executive director

Ben Hood, co-founder and former chief executive of Fourth, has joined the board of S4labour as non-executive director. Hood joins S4labour after 20 years at Fourth, with immediate effect. His appointment is part of the next stage of S4labour’s journey to support the hospitality sector.

Alastair Scott, chief executive of S4labour, said: “I feel privileged to have someone like Ben join our team. He will be a great help to us as we continue to create unique and mission-critical tools for the industry. S4labour is a very different and exciting proposition for him and together we will be able to make the best decisions we can to support this wonderful sector.” Hood added: “Alastair and the wider S4labour team really understand the sector and care a great deal about the operators. The level of innovation and ambition is really exciting, and I love how they are going about improving productivity across the sector. They believe in partnerships and service and have some fabulous success stories in such complex times. I am pleased to help them with the next chapter.” 

S4labour Appoints Ron Pearson as Non-Executive Chairman

S4labour has announced the appointment of Ron Pearson to the newly created position of non-executive chairman, with immediate effect. For more than 20 years, Pearson was a partner of private equity firm Bowmark Capital, helping the firm invest in the likes of Las Iguanas, Drake & Morgan and Living Ventures, while also becoming a director of each. Pearson, who has a track record of helping businesses to grow successfully, will be working alongside S4labour’s board to help continue its “strong and sustainable growth”, using his wealth of knowledge and “considerable financial, strategic and operational experience”.

Pearson said: “S4labour is a business that offers huge potential for operators and front-line workers in the industry. Since investing in the business, I’ve admired the company’s level of innovation and service delivery and I’m excited to join the team to further fuel its growth.”

Alastair Scott, chief executive at S4labour, added: “As a start-up business with more than 50 employees, we need to continue to grow, innovate and lead the industry in customer service and consultancy support. Ron’s support in delivering this will be invaluable.”

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