NIESR - Pay-Setting among Employers in the Agriculture, Cleaning, Hospitality and Retail Sectors

A better understanding of the ways in which these factors affect employer pay setting is crucial for an understanding of how these employers responded to recent changes in the National Minimum Wage and the National Living Wage, and for discussions about how they will manage future increases to the National Minimum Wage and the National Living Wage (NMW/NLW). [...] Senior managers in 41 businesses across the UK were interviewed to explore how they set pay and why, how their pay setting has been influenced by the changes in the NMW and the NLW rates, as well as the contextual factors over the recent years, and what strategies they have for managing future rises in the NMW and NLW. [...] One employer described that the amount they would have to charge to customers would also be higher than the increase to the NMW rates as they would need to cover insurance and employer benefits too: “We have to charge out £2 extra per hour to the client, so for every 50p that the Living Wage goes up we have to charge out £1 extra because it’s not just 50p, it’s 50p plus the holiday pay, plus sick. [...] Another employer said that it was the high percentage that the NMW and NLW rates had risen by in the past year that was the reason they could not just absorb labour costs as they had done previously, and instead had to pass some of the costs to their customers: “When I calculated the original contract price I felt it was fair. [...] One employer described how they tried to mitigate losing customers by meeting with their clients to placate them about the increase to their prices and to prove that they are a high-quality service that is worth the higher prices: “I’ve gone to the clients to see if they want to reduce costs and where to reduce costs...