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In April this year, the minimum wage goes up again and the narrative from the government is that it’s something to be celebrated.
In April 2024 the rates will be as follows:
- The National Living Wage is to increase 9.8% to £11.44.
- The 18-20 year old rate is increasing 14.8% to £8.60.
- The 16-17 year old rate is increasing 21.2% to £6.40.
- The apprentice rate is increasing 21.2% to £6.40.
But how will that affect businesses and their recruitment needs?
The successive minimum wage increases place a burden on businesses, especially small and medium-sized enterprises.
These are the same businesses that have faced surging bills for rent, electricity, and imports, as well as rising interest rates. And now they need to increase another line in their budget, at the same time that consumers aren’t spending any more.
The sums don’t add up…
A total of 30,199 UK businesses were involved in some kind of insolvency action in 2023 – 52% higher than in 2021, according to Creditsafe, a credit checking agency which tracks 430m businesses around the world. A figure that could be repeated in 2024 if the challenges we face keep increasing.
It’s going to be incredibly hard for businesses to absorb higher labour costs without cutting back their staff or turning to technology to reduce the number of staff they need.
Or they will pass the cost on to consumers, who might have more money in their pocket thanks to the minimum wage increase but will likely be funnelling that into covering the higher cost of bills and not necessarily able to cover the increased price of goods.
There have been a few impacts on the recruitment sector…
Once we start paying minimum wage staff the equivalent of what we pay skilled labour (e.g. drivers), those skilled labour positions will start to want more money as they will see it as unfair being paid the same as unskilled workers.
Suddenly it’s not just your lowest paid workers getting an increase, it’s everyone. This means employers need to become more discerning about their staffing, and ultimately will not be recruiting as many people.
Not great news for recruiters.
Alternatively, they don’t increase the wages of skilled workers, and it makes it harder for recruiters to fill those roles.
Or they might want to put people with a higher skill level into the minimum wage roles to justify the expenditure, which means there will be fewer entry level jobs.
It is wise for businesses to focus on staff retention and training to keep their skilled workers and avoid training and recruitment costs.
The government’s commitment to addressing income inequality through minimum wage increases has been a focal point in recent years. However, as businesses and the recruitment sector continue to grapple with the adjustments, it remains crucial for policymakers to assess the broader economic impact and refine policies accordingly.
In 2023, DMOS People didn’t increase our prices even though inflation went up. We did this to support the businesses we work with, through the challenges in the current economic climate.
If you’d like to speak to us about your recruitment strategy, call us today on 01743 211760.
