The new 'National Living Wage' will result in more than half of all employers in the UK having their wage bill increased, according to a study by the Resolution Foundation and the CIPD, the professional body for personnel staff.
One of the first surveys to test the sentiment ahead of the National Living Wage's introduction in April 2016, 54% said it will have an impact on their wage bill. Organisations will have to pay over 25s at least £7.20, up from the current national minimum wage of £6.70, when the law is introduced.
A third of those surveyed also said that they were planning to offset the higher costs by boosting productivity among staff.
Conor D’Arcy, a policy analyst at the Resolution Foundation, said: “It’s encouraging that so many firms say that they’ll respond to the new higher wage floor by improving efficiency. But actually delivering this will prove challenging in many sectors, and it’s important that firms are given the necessary support to boost productivity.”
The survey of more than 1,000 employers found that the retail (79%) and hospitality (77%) sectors are the most likely to be affected. A third of those in the sectors said they would be "significantly" affected by the increase.
More than one in five organisations said they would accept lower profits as a result, 16% said they would reduce overtime and bonuses, 15% said they would raise their prices and a further 15% will be forced to cut jobs and reduce their recruitment plans.
Mark Beatson, chief economist at the CIPD, said: “The national living wage was a bombshell for most employers when it was announced in July. It comes into force next April, which does not give employers a lot of time to prepare. Hence we found 26% of employers in September saying it was still too soon to say how they would manage the cost implications.
“For those that have started to think about the consequences, the emphasis on efficiency rather than cost-cutting is welcome. However, our research also suggests that only a small proportion of firms see any substantial connection between the national living wage and other changes to taxes and national insurance contributions.
“If the chancellor wants to provide any more support for businesses grappling with the national living wage in the autumn statement, it might be better delivered through enhanced business support or special help for the care sector rather than shaving small amounts off general business taxation.”