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03 May 2016


Pay rises and issues surrounding the national living wage

As of April 2016, all UK workers over 25 years of age were entitled to a pay rate of £7.20 per hour following the introduction of the National Living Wage.  Whilst it sounds like great news on paper, these pay rises may be a double-edged sword for many workers.

Some feared that businesses would cut costs to reduce the impact of the increased minimum wage. A recent example of a business making cutbacks to subsidise the pay increase came from Caffe Nero. The multi-million pound coffee chain made headlines when they scrapped meal benefits for employees in order to reduce business costs in light of the pay rise.

Previously employees had been entitled to a free Panini under the food allowance scheme, but this has now been revoked. Management wrote a letter to staff detailing how the new living wage has had a “significant financial impact on the business”. Employees of the coffee chain will still receive unlimited drinks such as tea and coffee whilst they’re on shift and a 65% discount on any food they purchase.

In a statement to the BBC, a Caffé Nero spokesperson said, “The introduction of a new National Living Wage is a huge potential cost to the business, but also a great opportunity to review pay, and reward employees for their investment in Caffè Nero.

“From 11 April, all current employees, regardless of their age, will be moved to at least the new National Living Wage if currently below it.

“Alongside this investment, all current employees will continue to receive paid breaks and a substantial discount on food and drink bought when on shift.

“Employees currently paid over the National Living Wage have all had a full pay review, and the big majority will be receiving a pay increase depending on their role or situation.

Much of this is above and beyond the minimal wage requirements.”

Businesses need to carefully consider the impact of reducing staff benefits to pay for the Living Wage. While contractual changes can be achieved to achieve cost savings, such changes may attract unwanted adverse PR and may result in ill feeling and grievances from employees.

If you have any questions about employee grievances, or you want some advice about the implications that the National Living Wage might have on your business, get in touch with one of our specialist team.

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