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Morning Briefing for pub, restaurant and food wervice operators

Fri 11th Mar 2016 - Large Fourth survey shows sector already paying over 21s more than £7 per hour
Large Fourth survey shows sector already paying over 21s more than £7 per hour: A survey of thousands of venues by Fourth has found the National Living Wage of £7.20 an hour may not cost the industry as much as originally thought – the average hourly rate for over 21s is currently £7.04 as of October 2015, just 16p shy of the new living wage. This number had risen from £6.96 a year earlier. This blended hourly rate compares with a current minimum wage that rose immediately after these numbers were collated – from £6.50 to £6.70 in October 2015 – suggesting hospitality firms are paying an 8.3% premium to the minimum wage. These figures suggest that, in reality, hospitality businesses have already moved a long way towards providing higher levels of pay to hourly-paid staff – on the face of it, reducing the impact the new living wage will have when it is introduced in April. Mike Shipley, analytics and insight solutions director at Fourth, said: “Our insight suggests the perceived gap between current pay rates and the new living wage is nowhere near as big as some in the industry may think. However, it is clear that the hospitality industry is already paying a premium, presumably to compete for the best people, and it’s a question of whether operators maintain that premium. If so, we could see hourly rates pushing the £8 mark and beyond, which will also put upward pressure on other more senior pay grades, potentially triggering wage inflation across the payroll at hospitality organisations. It is also important to remember that further annual ratchets are scheduled, such that the living wage will rise to £9 by 2020, meaning a salary of almost £22,000 for a 25-year-old working a 48-hour week. Businesses need to continue to work extremely hard to find ways to absorb these jumps.” The analysis also suggests the industry is delivering some significant productivity gains, with sales generated per labour hour increasing from £32.33 to £33.11, in the 12 months to September 2015 – a gain of 2.4%, which follows a similar rise the year before. Shipley added: “The new living wage will inevitably prompt companies to look harder at productivity and efficiency. We are currently working with many different hospitality and leisure companies, looking at these issues and using analysis to drive revenue per labour hour and to identify and eradicate wasted labour hours. It is a complex challenge but one that can deliver substantial productivity gains, and that is surely the key to weathering what will surely be a new era of labour inflation for hospitality.” The rate in London already exceeds the living wage – £7.23 as at October 2015 (inside M25). Hotels are paying the most, with an hourly average rate of £7.58.

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