Increases in the Minimum Wage - Considerations for the Hospitality and Leisure Sector

The Tourism, Hospitality and Leisure sector is believed to have the highest proportion of jobs paying the minimum wage of any sector, at around 30% of the total. However, Hospitality wages have risen by some 53% over the last ten years. 

Minimum wage catalysed by Brexit

Low income workers actually saw some big increases in pay in 2023, with the average hospitality worker's wages rising four times faster than the average UK worker's wages, at a level of around 19%  vs 4.9% on average.

Trade Unions and worker advocacy groups have been actively campaigning for better wages and improved working conditions in the hospitality sector.

In addition, the UK government has been committed to addressing income inequality and improving living standards. As a result, they have implemented policies to increase the minimum wage, particularly for sectors such as hospitality and leisure. Since 2012, the National Minimum Wage has increased 53% from £6.19 per hour to £9.50 per hour.

This has also been driven by staff shortages, caused by Brexit decreasing the number of workers from the European Union, being able to work in the  UK.

There are several additional factors contributing to the increasing wages in the hospitality sector in the UK. These include the increase in the cost of living and a push for higher wages to help workers cope with the rising expenses and maintain a decent standard of living. Plus, The hospitality sector in the UK has been facing challenges in attracting and retaining skilled workers. With a tightening labour market and increased competition for talent, employers may need to offer higher wages to attract and retain qualified staff.

The knock on effect is that for many in the sector, already tight margins are being further squeezed. Finding a balance between fair wages and business sustainability is a key consideration for this sector.

Key points to consider:

• Higher wages for workers: Minimum wage increases result in higher earnings for employees in the hospitality and leisure sector. This can improve the financial well-being of workers, reduce income inequality, and potentially lift some workers out of poverty.
• Cost pressure on businesses: For employers in the hospitality and leisure industry, higher minimum wages mean increased labour costs. This can particularly impact small businesses, which may have tighter profit margins. Businesses may need to adjust their pricing, streamline operations, or find other ways to manage the increased expenses.
• Potential job losses: Some businesses, particularly those with lower profit margins or struggling financially, may find it challenging to absorb the increased labour costs. As a result, they may reduce their workforce, limit hiring, or even consider automation to offset the higher wage expenses. This can lead to potential job losses or a slowdown in job creation.
• Potential price increases: To compensate for higher labour costs, businesses in the hospitality and leisure sector may raise their prices for goods and services. This can impact consumers by increasing the cost of dining out, hotel stays, entertainment, and other leisure activities.
• Improved productivity and efficiency: In response to higher labour costs, businesses may invest in training programs, technology, or process improvements to enhance productivity and efficiency. This can help mitigate the impact of wage increases and potentially lead to a more productive workforce.

It's important to note that the specific impact of minimum wage increases in the hospitality and leisure industry can vary depending on various factors, such as the size and financial health of the business, regional economic conditions, and the specific wage increase implemented. The consequences can be complex and may have both positive and negative effects on different stakeholders.

That is why it is wise to talk to accountants who really understand your business and this sector specifically.