The reality of hourly pay-rate inflation has been laid bare by Fourth, the leading global software partner to the hospitality and leisure industries, with figures showing that actual pay is significantly outstripping new legal minimum wage thresholds.
Figures mined from Fourth Analytics on the pay for thousands of hourly-paid UK hospitality workers reveal that average rates have now hit £7.71 – and not just for employees aged 25 and over. The figure (of £7.71) is an average based on the analysis of the hourly pay of all age cohorts – including under-21s and workers aged between 21 and 24.
Average pay – with the under-21 group analysis removed – reveals that the average hourly rate in hospitality has hit £7.92. This rate is 72p – or 10.0% – ahead of the national living wage (NLW) of £7.20, a new rate that was introduced for workers aged 25 and over in April 2016. Days before the statistics were extrapolated, legislative increases were also introduced to the NLW for workers aged 18-20 and 21-24.
Mike Shipley, Analytics and Insight Solutions Director at Fourth, said: “With actual pay significantly outstripping the legal minimum for all age thresholds, businesses are clearly experiencing very strong employment-cost inflation.
“Clearly it is difficult to predict whether this momentum will continue but there’s no sign of a levelling off at the moment. We expect to see the hourly-rate average in hospitality hitting £8 in January 2017, and we could well see average rates approaching £8.50 by April 2017 – when the next incremental increase comes into force. This could see the minimum legal living wage (for over-25s) move up to between £7.50 and £7.65.”
Fourth Analytics can reveal that the actual average hourly pay for all ages in hospitality (£7.71) has risen by 12.6% in the past two years – and is up by 24p in the three months since June 2016 alone. Shipley added: “What’s particularly striking is that the under-21s are fast catching up, earning on average £1.53, or 29%, above their legal rate. This could be driven by wage parity policies, and also general competitive pressure for good people.”
Gender pay gap disappears
The latest figures also reveal that the gender pay gap has now completely disappeared. Previously males earned 13p more per hour in June 2016 and 21p more in 2014. This is a blended figure across the hospitality, with men earning more on average in the pub and restaurant sectors, while women earn more in the QSR and hotel sectors.
London-regional pay gap narrows
Since the introduction of the NLW, the regional pay gap between London and areas beyond the M25 has narrowed – from 25p in 2014-2015, to 11p (October, 2016). Consequently, companies with operations outside of London have seen staffing costs rise more sharply, placing pressure on operating margins.
While the hospitality industry is experiencing significant wage growth, it also seeing growth in sales achieved per worker per labour hour, which has risen from £31.94 in 2014 to £34.88. In that time labour costs as a percentage of sales have risen from 27.3% to 28.0%.
Commenting on how companies were meeting the hospitality pay challenge, Shipley said: “It is clear that many of our clients are engaged in productivity programmes and initiatives, such as smarter rota scheduling and driving the amount of revenue taken per worker / per labour hour. It is one of the key ways that hospitality and leisure companies can combat this era of aggressive labour inflation.”
Further increases in the National Living Wage are due next April, 2017. The current rates, from 1 October, 2016, are:
- £7.20 per hour – 25 years and over
- £6.95 per hour – 21-24-year-olds
- £5.55 per hour – 18-20-year-olds
- £4.00 per hour – 16-17-year-olds
- £3.40 per hour – for apprentices under 19 or 19 or over in the first year of apprenticeship