HR Consultant, Sue Westhead, takes a view on the realities of the National Living Wage on SMEs – in this case, around agriculture and food production.
I watched an interesting programme, which provoked a lot of thought for me as a HR professional, on the topic of the living wage.
COUNTRYFILE’S Vegetarian Special* certainly stirred up plentiful debate, as farmers revealed their difficulties with the new National Living Wage and the impact that this would have on the UK farming industry – where production processes require substantial hands-on labour.
Agricultural Business Heads spoke to Tom Heap about how their businesses will struggle to survive as the payroll bill increases with the National Living Wage rise to £7.20 per hour for over 25s – rising to over £9 per hour in 2020 in England.
The additional wage had allowed one farm worker to book a holiday and start to save for a house. The fact that it might put some farmers out of business was something that worries her but she tries not to think about it.
The featured Essex-based farmer, employing up to 60 workers at peak times, predicted that his business would be financially unsustainable within four years, suggesting he would have to innovate (perhaps through mechanisation) or move operations abroad to Eastern Europe in order to stay afloat. Perhaps another issue for Brexit?
An NFU board member says she is not against the principal of the National Living Wage – but how can we afford it? The NFU member would like to see a ‘student agri-workers’ scheme – allowing farmers to use students from around the world. They would be paid reduced rates but would gain experience, and farms could take advantage of new ideas that they might bring.
Britain imports more fruit and vegetables from Spain than any other country, but Spanish growers pay just over £3 per hour while British growers are forced to pay £7.20 per hour. We buy more from Spain than any other country.
Farmers need major retailers like our supermarkets to reduce their margins or consumers to pay more. Retailers argue that they’ve suffered price deflation and price is key to consumers. They suggest that farmers need to understand price pressure – that retailers know they need to pay a pragmatic price but it’s ‘outside their control’. We are not as supportive of buying home-grown produce as we’d like to think – would you pay more for British goods?
We’ve taken a look here at agriculture as an example of how the National Living Wage is hitting SME businesses hard. The reality is biting across all sectors, and businesses may not survive unless they radically look at how they can compete better – in spite of a potentially increased wage bill. If businesses fail then there will be a negative effect on jobs. And no wages will be paid in those cases, of any amount, with or without the National Living Wage.
If you are thinking about your options for the way ahead post-National Living Wage, which might include restructures or mergers, or bringing in more advance technologies for production, this will majorly impact on your people practices – and the HR180 team are here to help you manage those changes, or find strategies to achieve any new efficiency drive. Please get in touch with our HR180 Heroes.
COUNTRYFILE’S Vegetarian Special*(Tom Heap’s reports starting at 6 ½ mins and then 23 ½ mins into the show).
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