Restaurant chains Wagamama’s and TGI Friday’s have been fined by HMRC for failing to pay the National Minimum Wage (NMW) to staff. This comes ahead of the NMW and the National Living Wage (NLW) increasing next month. Each group had said that the failure to pay NMW was down to a misunderstanding and have reimbursed the employees affected. Although these two companies are the highest profile, they are only 2 of 43 employers in this sector who were fined for failing the meet the standard.
The increases to the National Living and Minimum Wage may be having an effect on the profitability of businesses in the hospitality sector. We have seen in recent weeks many restaurant chains admit to being in financial difficulty and closing branches, including Jamie’s Italian, Prezzo, and Byron Burger. The BBC has reported that only one in three of the UK’s top restaurant groups is making a profit. This has been put down to a number of factors including the cost of imported ingredients, saturation of the market and the increased cost of paying staff.
Peter Kubik of Chartered accountants UHY Hacker Young says that the above inflation increases in the National Minimum Wage next month will be difficult for many of these restaurant chains to absorb. They have also seen the increase in business rates and consumers who have seen low wage growth and increased inflation.
In May last year, the Institute of Fiscal Studies warned ahead of the General Election that the increase in the minimum wage by both Labour and the Conservatives would cost jobs and penalise those who were supposed to benefit. Although it may be too early to say whether this is the case, the impact on the hospitality sector which has seen many outlets close, could be evidence that employers are unable to sustain the current level of employment with the National Minimum Wage.
Empire can support you with issues relating to the National Minimum Wage. Please call 01224 701383