Chancellor announces pay rise, adding £1.9bn to hospitality wage bill

By James Bayley

Published: 30 October, 2024

The hospitality sector is facing a substantial increase in operating costs as the Chancellor confirms a 6.7% rise in the National Living Wage, set to take effect in April 2025. The uplift will raise the hourly rate from £11.44 to £12.21, directly impacting more than 3 million workers and adding an estimated £1.9bn to the hospitality sector’s wage bill.

The increase is part of a broader government effort to meet its commitment to a genuine living wage. This translates to an additional £1,400 per year for eligible full-time workers. For younger workers aged 18 to 20, the National Minimum Wage will increase from £8.60 to £10 an hour, which represents the highest single rise on record, equating to up to £2,500 annually for full-time roles.

However, Kate Nicholls, chief executive of UKHospitality, warned of the added pressures this change will place on the sector: “These wage rises are well above expectations and make the Budget even more important. It’s an added £1.9 billion to the hospitality wage bill, on top of the cost of the Employment Rights Bill and, if rumours about the Budget are true, employer NICs and business rate rises. Trying to balance the books from the pockets of high street businesses will simply leave hospitality as collateral damage – threatening jobs, future investment, price increases for consumers and business viability.”

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Nicholls added that many businesses in the sector are already grappling with rising costs and that the impact of increased wages, combined with other pressures, could strain resources across the industry. “Our companies desperately want to be able to support higher wages for staff, but what is being asked of them is simply unsustainable if taxes are going to shoot up at the same time.”

Baroness Philippa Stroud, chair of the Low Pay Commission, recognised the government’s intentions in raising wages but acknowledged the difficulties faced by employers. “Our job is to balance these considerations, ensuring the NLW provides a fair wage for the lowest-paid workers while taking account of economic factors,” she said, noting that the new rates represent a real-terms increase for younger and adult workers.

The hospitality industry awaits further details from today’s Budget, with calls for targeted support to ease pressures on high street businesses. Nicholls stressed the importance of relief on business rates and the introduction of a lower, permanent rate for hospitality, which she argued would be essential to support the sector through rising wage and operational costs.

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