Almost half of the hospitality industry (48%) will be affected by the NLW in 2020 and those employees will see a 3.4% wage increase, according to research by think tank, Resolution Foundation.
The analysis took into account three measures to identify the impact of the NLW on employers - the change in the wage bill, the number and share of employees, and the ‘bite’, which is the NLW measured as a proportion of the typical (median) wage.
In the hospitality sector, the bite in 2016 bite will hit 101%, affecting 43% of the industry, which will experience a 1.3% wage bill increase. However, in 2020 the bite will hit 110%, affecting 48% of the industry, which will see a 3.4% wage increase.
In 2020, 33% of the hospitality industry will be directly affected by the NLW introduction and 15% will be indirectly affected. The figures for hospitality are far higher than the overall average which sees 12% directly affected and 11% indirectly affected.
Employees are directly affected when they are expected to be earning less than the NLW but will get brought up to (or beyond) the new wage floor. The indirectly affected are workers who are already earning slightly above the NLW, but evidence suggests that many firms choose to keep pay gaps between different employees to recognise roles.
Across the whole economy, one-in-four (23%) of workers are set to gain from the NLW, the bite across all workers is expected to rise from 55% in 2014 to 65% in 2020, and Britain’s total wage bill is expected to increase by 0.6% in 2020.
The think tank also found that the smallest firms - those that employ fewer than 10 workers - are likely to feel the greatest impact on average. The NLW is expected to add 1.5% to total wage bills in 2020, with the average bite is in line to rise from 70% in 2014 to 83% in 2020.
In firms that employ more than 250 employees, which account for 52% of all affected employees. The research estimated that firms employing 250-4,999 will face an average increase of 0.6% in their wage bill by 2020, while firms with 5,000 or more employees record a slightly higher change at 0.7%.
The full report, Taking Up The Floor - Exploring the impact of the National Living Wage on employers, is available to read here.