Employers cautious over pay rises next year

By Ken Maggs, Moore Thompson

As 2015 draws to a close, a study by the Confederation of British Industry (CBI) shows that bosses plan to keep hiring staff next year but could limit pay rises in anticipation of the new national living wage and apprenticeship levy.

According to the business group’s annual employment outlook, some firms are also thinking about price hikes or recruitment freezes to offset the higher labour costs the new wage and levy are expected to bring.

The survey found that almost half the business owners polled anticipated that the new levy would be “costly and bureaucratic”, although it was conducted before Chancellor George Osborne confirmed in his Autumn Statement that it would be set at 0.5 per cent of an employer’s payroll only if the annual wage bill of the firm was more than £3m.

According to the CBI, the employers surveyed had expressed support for the aims of the levy and for funding it but some had concerns that the Government merely wanted to hit targets for a quantity of apprenticeships rather than focussing on quality.

Meanwhile, just over 40 per cent of respondents said they expected their workforce to be larger by the end of 2016 and more than 50 per cent said they intended to increase pay in line with the retail prices index (RPI) measure of inflation, which was 1.1 per cent last month.

When asked about the national living wage, which will increase the minimum hourly rate for workers aged 25 or older to £7.20 from £6.70, a small percentage thought they would have to raise prices to offset it and almost 30 per cent said they would be employing fewer people because of it.

However, the effect will be more pronounced in the hospitality industry, which traditionally relies on lower paid staff. More than 50 per cent of employers in this sector anticipated having to raise prices and almost 30 per cent said they would employ fewer people.



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