Hospitality wages increase in January

The average wage in the hospitality industry rose by 2.5% in January to £8.84, according to the new statistics from global software provider Fourth.

It follows the Government’s New Year announcement that the National Living Wage (NLW) will increase by 6.2% to £8.72 in April 2020.

The figures from Fourth, which are taken from the hourly rates for thousands of workers across 4,000 hospitality businesses, come after a period where wage rates remained relatively flat from April to December.

During that period, the average hourly rate for workers over the age of 25 sat around £8.60, roughly 40p greater than the NLW threshold of £8.21 introduced in April 2019.

Since 2016, the hourly wage has been, on average, 43p higher than the NLW. However, Fourth said this “buffer” has now decreased as a result of the Government’s commitment to increase the NLW further.

The figures suggest a sustained period of wage inflation to meet the new legislative threshold in April 2020, which is currently 12p higher than the average hourly wage.

Mike Shipley, vice president of analytics at Fourth, said: “This is the first time in the four years we have been tracking these figures that the average wage of the industry was threatening to track under the new NLW rate, due to be introduced in April, until the average rates increased dramatically by nearly 3% solely in the month of January.

“Historically, businesses have paid a premium above the NLW to attract and retain the best employees, and January’s rapid wage inflation shows that this is set to continue over the coming months, where it may well rise by a further 2-3% between now and April, as operators continue to seek the best staff.”

He added: “A 5-6% spike in the hourly wage rate over one quarter could be hugely impactful on overall net profit margins, reducing it by up to 1-2% in some cases, adding significant labour cost pressures on operators and squeezing already tight margins.”