The Scottish Grocers’ Federation and Association of Convenience Stores have met with representatives of the Low Pay Commission (LPC) to raise concerns that soaring wage costs could hamper employment and put some small businesses at risk.
The meeting forms part of the LPC’s annual oral-evidence session. Testimonies gathered by the LPC, alongside responses to the annual consultation exercise, will inform the commissioners recommendations to government for the 2024/25 National Minimum Wage (NMW) and National Living Wage (NLW).
On 1 April this year, the UK NLW increased to £10.42, a 9.68% increase on 2022/23. However, a collaboration between SGF and University of Stirling has revealed that the True Cost of Employment for retail is closer to £14 per hour. A jump of £1.25 or 9.8% on the previous year and the highest increase of at least the past eight years.
The LPC currently estimates that the NLW rate required to meet its 2024 target will be in the range £10.90 to £11.43, with a central estimate of £11.16. Seeing a further rise of up to £1.01 on this year’s NLW.
However, a recent survey of SGF members shows that more than 70% of respondents were less likely to hire more staff, due to the wage increases, with many working over 65 hours per week, just keep costs down.
SGF Chief Executive, Pete Cheema, said: “Many convenience stores provide lifeline services and essential local employment for their communities. The never-ending pressure of absorbing more and more added costs, however, has put some businesses at risk.
“Many retail employees value the benefits of being able to work locally, and the ability to work flexible hours, but every significant wage increase leads to more staff hours being cut. Which has a damaging impact on local jobs and employment.
“The Commissioner and Ministers, in both Westminster and Edinburgh, must recognise that local convenience stores are vital economic drivers, that provide many benefits for their communities. On top of rising energy prices, business rates and regulatory pressures, our governments can and must do more to alleviate the growing pressure on our sector.”
Meanwhile, the ACS has called on the LPC to establish a new emergency brake mechanism for wage rates if increases have a negative impact on businesses and the wider labour market.
At the evidence session, ACS chief executive James Lowman highlighted the importance of the LPC’s independence in recommending future wage rates based on their own economic analysis, rather than bowing to political pressure and arbitrary targets.
In addition, ACS has called on the commission to consider the introduction of a new emergency brake on wage increases, which would be put in place if any of the following impacts were being felt:
- A reduction in employment opportunities for low paid workers.
- A shift towards more gig economy employment.
- A reduction in in-work progression.
- An impact on the attractiveness of entrepreneurship.
- A reduction in business investment.
Lowman said: “It is essential that the Low Pay Commission continues to make recommendations for future wage rates based on independent economic analysis and detailed discussion with businesses about the impact that labour costs are having on their businesses.
“Convenience stores provide genuine two-sided flexibility, with high quality secure, local and flexible jobs, but they are under significant pressure due to recent increases and challenges in the labour market when it comes to recruitment and retention. An ‘emergency brake’ mechanism to suspend uprating when wage rates have a detrimental effect on employment opportunities could prove crucial to the long-term sustainability of UK retailers and many other business sectors.”
