Paying the National Living Wage

New research in this data pack, conducted by the Social Market Foundation, analyses the potential impact of the new National Living Wage rate on businesses across the UK.


Sectors and employees affected

  • Around a quarter of private sector employees will be directly affected by the introduction of the National Living Wage (NLW), double the proportion of public sector employees.
  • Workplaces severely affected are concentrated in retail & wholesale and food & accommodation services.
  • There are very high levels of part-time working (nearly half of the workforces) in severely affected workplaces.
  • Younger workers – those between 25 and 29 make up 18% of employees directly affected by the NLW. But NLW is not just about young people – surprisingly, a third of those directly affected are aged over 50.

Businesses may be forced to address discrepancies in wages as a consequence of the cliff-edges created by excluding those under 25 from the NLW.

The prevalence of part-time workers may present particular challenges to business because the case for investing in their skills may be weaker than for full-time workers.

Training and skills

  • Many directly affected employees are in elementary occupations (28%), jobs which require no formal qualifications.
  • A very large proportion (four in ten) of directly affected employees either have no qualifications at all or only GCSE-level qualifications.
  • Severely affected workplaces are much less likely to provide ongoing training to their staff – with 46% providing no training or training to less than a fifth of their experienced staff in a six month period.

The low stock of skills amongst those affected and the relative lack of access to in-work training mean that businesses and the Government will have to act to make sure that productivity rises alongside the regulated wage.

Factors affecting pay

  • Severely affected workplaces have low levels of unionisation, and for 47% of them, pay settlements are driven by the level of the minimum wage. But for a sizeable number – 40%– financial performance is a key factor, raising questions as to how these firms deal with rising wage bills.

Our evidence on how pay is determined in severely affected workplaces suggests that many firms will have to take big steps – such as increasing efficiency and performance – to be able to afford rises in their wage bill.

Download The Report: PDF

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