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Insight from the experts

Sue Parfett looks at the government's new National Living Wage and the forthcoming Apprenticeship Levy

Posted by Hannah Oakman | May 27, 2016 | Catering & hospitality

The government has introduced a new form of minimum wage, the ‘National Living Wage’ – the first in a series of changes they plan to bring about in employment trends. Whilst I fully appreciate its objective, I want to raise its impact from the perspective of a business-owner rather than an economist, civil servant or MP. 

The National Living Wage is effectively a rebranding of the National Minimum Wage with an additional age bracket added to the top of the scale – this is the part referred to as the ‘Living Wage’. Employees over 25 must now earn at least £7.20 per hour, whilst the National Minimum Wage remains unchanged. Both will be reviewed every year until, presumably, they will merge, as it is a slightly odd implication that life becomes more expensive at 25. It also effectively makes all 25+ unskilled workers less employable, resulting in greater demand for younger workers.

However, the government still isn’t able to give us more than six months notice of a change. I suppose it is to be expected for people who see their working lives in five-year periods.  As the threshold rises, it is going to catch more and more, and, a notice in October, of an April increase, just isn't enough. How are schools, or those who serve them, meant to plan a year that starts in September? Many government contracts don’t allow for the contractor to raise the cost mid budget period!

The minimum wage has always been met with criticism. Our southern-based sites are barely affected as market forces already require a higher hourly rate. In other parts of the country, where unskilled jobs rarely command more than the minimum wage, this will have greater impact. The impact on industry as a whole is what economists view, but those of us in labour-intensive service industries feel this much more. I have many colleagues in the hospitality industry who are already trading on the edge of survival. 

However, as a business that values its employees, it has always been my belief that in order to attract the best workers, we have to offer a competitive salary – i.e. not Minimum Wage. A government scheme I am more interested in is the Apprenticeship Levy, to come into effect next April.

This new scheme aims to increase the amount of apprenticeships employers offer. The levy will be charged to employers whose payroll exceeds £3 million, and the amount will be calculated as 0.5% of their total payroll with an annual allowance of £15,000 to offset against the levy. 

The Conservatives have been talking about apprenticeships for years now, but this is the first initiative that involves business meddling. The whole stance of a party that came to power on a 'less bureaucracy in business' ticket is bewildering. As a company which already offers substantial training, this is annoying. Successive governments have effectively ignored full time vocational training in education and now decided that employers should be required to fill the void. We can no longer choose to train in a way that suits our business - the nanny state knows better. And guess what? For a scheme that potentially costs employers thousands and starting next April, we are not getting the detail until July. I can feel the ‘consultants’ circling!

Then I’m reminded of the success story of Rahel from one of my recent articles. In the new world of apprenticeships and living wage, that is a story that may never have happened. Are there really that many potential apprentices looking for training? Or is it that an 'apprentice' gets a new definition? What businesses really need is a valuable step towards a more effective system of vocational education and something I have been championing for a while. This would mean educators educate and businesses do business. But that would need politicians to put their (our) money where their mouths are. Whereas getting employers to pay seems the mantra of government since the nineties.

I remain cynical about all things political for the planned future. I can feel them working out the next 'wheeze' when it comes to the outcome of Brexit or not to Brexit!

Sue Parfett is Managing Partner of the independent schools’ caterer, The Brookwood Partnership


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