Business

2020 Could See a Dramatic Increase in the National Living Wage

by akesha / last updated June 14, 2019

2020 National Living Wage

Wages in the hair and beauty industry have always been a hot topic. While many young stylists and apprentices coming into the industry believe they are being paid too little, salon owners and managers are finding the continually increasing baseline pay hard to keep up with and with this 2020 National Living Wage it could become even harder to do so.

Since the National Living Wage (NLW) was introduced in 2016, the rates for 25 year-olds and over have risen by £1 per hour from £7.20 in April 2016 to £8.21 in April 2019. And now they are expected to go up again to £8.67 per hour in April 2020, a rise of more than 5%.

Big wage increases have coincided with higher contributions to pensions auto-enrolment over the last two year, pushing up wage-related costs further.

Despite this strain on small business owners the government is considering further large rises beyond 2020, reaching £9.61 per hour in a move to end low wages, although the timescales for this are not clear. A rate of £9.61 would push the UK’s rates to the highest anywhere in the world.

At the moment, the UK National Living Wage is the fourth highest, with only Ireland, France and Luxembourg having higher rates.

Ahead of submitting its consultation response to the Low Pay Commission, the NHF/NBF surveyed 400 of its Members to assess the impact of wage increases. As wage-related costs account for up to 60% of overall business costs for service industries, it is not surprising that over two thirds of survey respondents (70%) said their profits had reduced – even though half had increased their prices within the last year.

Most were worried that the frequent price increases needed to keep up with rising costs could push clients to competitors. To cut costs, almost half have stopped recruiting, a third are no longer keeping apprentices on, and a quarter have reduced hours.

Only 13% are starting to take on chair renters rather than employing people, but this is part of a continuing trend, confirmed by recent NHF/NBF research, which shows the number of self-employed people in hair and beauty has risen to just over half (56%).

On the proposed increased wages Hilary Hall, NHF/NBF chief executive, said: “Everyone wants to see stylists, barbers and therapists of all ages earning a decent wage. But there comes a point when ever-increasing wage costs become unaffordable for small businesses, especially service industries where wages and pensions represent a high proportion of overall costs.”

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