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One-quarter of employers have cut back on recruiting in response to the national living wage

Around one in four employers have cut back on their recruitment, a recent study has found

A report by the British Chambers of Commerce (BCC) suggests that the new legislation regarding minimum pay has already had a significant negative financial impact on a number of UK companies. The national living wage, which was introduced on 1 April for all working people aged 25 and over, is set at £7.20 an hour. The national minimum wage (NMW) still applies for those under the age of 25.

The study, which questioned 1,600 company leaders, discovered that one-third were planning to reduce the number of staff if the current NLW increases to a proposed £9 by the year 2020. Other firms featured in the report said they were intending to change their staff benefits, hours or pay increases due to the rising costs associated with paying the increase in wages.

The BCC’s head of education and skills, Marcus Mason, said that many companies will need to reassess their existing business plans by taking measures such as reducing staff and increasing their prices to customers if the £9 an hour NLW comes into effect. He added that a number of employers had already been forced to reassess their business plans as a result of the introduction of the lower NLW and some had found it necessary to cut back on recruitment or existing plans for growth.

He suggested that the government should take another look at the proposals and that any future increase in the NLW should be evidence-based, taking into account all relevant factors. These include those likely to affect British companies, such as a slowdown in growth, business uncertainty and higher costs to employers.

A spokesman for the Department for Business, Energy and Industrial Strategy reiterated the government’s commitment to the national living wage, saying that the strategy is part of a policy aimed at building an economy that works for everyone. The spokesman added that the government is taking steps to ensure the NLW works for both businesses and employees and pledged help for firms both large and small.

If the recent study is to be believed, however, a large number of British companies – and by association, their staff – are already seeing negative effects.

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