What effect will the living wage have on the UK hospitality sector?

The UK national living wage increased by 50p to £7.20 for those aged 25 and over in April this year, adding to staffing costs for thousands of hotels, bars, cafes, pubs and restaurants.

What effect will the living wage have on the UK hospitality sector

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The government is committed to increasing the living wage every year, meaning that businesses need to take urgent steps to ensure they can afford to minimise the impact and retain good staff.

Covering higher wage bills

This latest increase is bound to put increased pressure on an industry already struggling with the national minimum wage, although the impact will vary from business to business. Hospitality relies on relatively low-cost labour to survive, as businesses have small profit margins and can struggle financially.

Unfortunately, some businesses will need to cut staff, while others may decide to increase their prices. It may be that some staff are replaced by machines to cut costs. Another option is for establishments to recruit young people under the age of 25.

Many realise that well-trained staff are a company’s best asset; therefore, more training could be undertaken, especially in relation to better managing employees. This could ensure less staff turnover, with retention a major issue in the hospitality sector.

The Guardian reports that some employers who introduced the voluntary living wage believe this led to higher productivity, with staff more motivated and loyal; however,
it is a fact that some will feel compelled to cut any staff benefits they had in place, such as discounts on food.

Maximising profits

The extra money spent on staff wages will have to be recouped by many businesses through maximising sales and reducing other costs where they can. While investing in new equipment at this time may seem unwise, this could pay off long-term if productivity and efficiency are improved. Businesses that decide they have no option but to replace staff with machinery will find that the initial outlay is soon recovered.

One way of increasing profit is to boost a business’s bottom line by maximising sales of drinks. It might be worth considering a post mix machine to help with this, which will help to keep the production cost of carbonated soft drinks down. These machines can be obtained from specialist suppliers such as https://empireuk.com/post-mix-products/post-mix-carbonated-soft-drinks/.

Hot drinks such as tea and coffee can also generate extra revenue.