NLW to hit Northern city employers hardest

Employers in Sheffield, Nottingham and Birmingham stand to be most affected by the introduction of the national living wage, according to research released today.

Analysis by the Resolution Foundation suggests that the national living wage (NLW), the new minimum wage coming into effect in April for workers aged 25 and over, will be felt very differently across the UK over the next five years.

By 2020, around six million employees – 23% of all employees across the workforce – are set to be affected, directly or indirectly, by the NLW.

However, a higher proportion of city staff will see their pay increase, according to the think tank. In Sheffield, 28% will be affected, with Nottingham predicted at 27% and Birmingham 26%. These compare with lower proportions in cities such as Cambridge (15%), London (14%) and Oxford (13%).

Conor D’Arcy, policy analyst at the Resolution Foundation, said: “The welcome new national living wage will have a huge impact on low pay, particularly towards 2020 as it approaches £9 an hour.

“While our analysis suggests the pay rise should be affordable for most firms, implementing the new wage floor will be challenging for some employers. That’s particularly true in areas where wages tend to be lower. Politicians must work closely with employers to ensure that the national living wage is a success, particularly in low-paying sectors.”

Research published tomorrow (5 January) by XpertHR looks at the sectors most affected and at how employers plan to manage pay differentials between the lowest paid and those workers on higher pay grades.

D’Arcy added: “It will take more than a higher wage floor to tackle Britain’s low pay problem. Governments and employers need to boost progression, making the most of employees’ existing skills and helping them to develop new ones. With the NLW set to rise significantly in coming years, it’s vital that positive steps are taken now before the higher wage floor begins to bite.”

Source: Resolution Foundation

The share of workers directly affected by the NLW comprises employees whose pay will be lifted up to the new legal wage floor. The total share affected is almost double that and includes employees who already earn above the NLW but are still set to benefit as employers seek to maintain pay differentials between staff.

In Scotland, 33% of Clackmannanshire employees will be affected, followed by Dumfries & Galloway (32%) and East Renfrewshire (31%). Many city employees are expected to be less affected, such as Dundee (18%), Edinburgh (17%) and Aberdeen (16%).

The national living wage is set to be introduced on 1 April 2016 at a rate of £7.20 per hour, with the Government increasing it to at least £9 per hour by 2020.