Employers are preparing to cut overtime pay and reduce rates paid for weekend working to claw back the extra cost of the new “national living wage”, according to a report by the recruitment group Manpower.

A survey of employers showed that workers who qualify for the wage, which is 50p an hour higher than the £6.70 minimum wage, will see little difference in their pay packets after businesses have made savings in other areas.

Firms are also nervous about the possibility of a Brexit after years spent hiring staff from across the European Union to fill skills gaps.

Manpower said that while most areas of the country and most sectors were continuing to hire more staff, businesses were concerned that a vote to leave the EU would make it harder to recruit foreign workers.

James Hick, a director at Manpower, said: “British businesses continue to create the job opportunities that have helped get Britain back to work since the 2008 financial crisis.



“But employers of all shapes and sizes rely on the free movement of people inside Europe to find the skills they need. The latest employment statistics showed that of the 521,000 jobs created in the last 12 months, 215,000 were filled by people from elsewhere in the EU.

“Let’s be realistic: we simply won’t be able to replace overnight the skills these people bring to the UK if we leave the EU, and it’s our economy that will suffer,” he said.

Most polls of business attitudes to Brexit show a large majority against. A poll last year by the British Chambers of Commerce showed a 67% vote in favour of remaining inside the EU. A poll of tech firms revealed that nine in 10 wanted the UK to retain its membership.

Hick said that with unemployment is at its lowest level since 2006 and the number of vacancies growing, it was unrealistic to suggest there is enough slack in the labour market to meet employers’ needs.

“We’ve already heard that some major UK employers plan to switch high-quality jobs from the UK to other countries in the event of Brexit – for example, HSBC has threatened to shift 1,000 banking jobs from London to Paris if Britain leaves. We think there’s a real danger this could be the tip of the iceberg.”

Hiring remained strong at the beginning of the second quarter, up 7% across the country compared with the first quarter. Retail hiring was the strongest since 2007. Public and social sector employers, which are attempting to reduce their reliance on agency staff and switch back to hiring full-time workers, were also among the biggest recruiters.

Unlike last year, when the north-west and Wales made gains on other areas, the stongest recruitment has reverted back to eastern England, the south-west and London. The report found there was little evidence that the high cost of living in London was encouraging companies to move out of the capital to cheaper locations.



The “national living wage” comes into force next month and applies to workers who are over 24 years old. Hiring among retailers stands at +8%, its highest level since 2007. Hick said: “We’ve already seen high-profile companies like Costa Coffee and Next saying they will need to raise prices to pay for the changes.

“Some companies are taking advantage of the age rules by hiring under-25s who are not eligible for the new pay rate, while others are changing their overall compensation packages to lessen the impact of the changes on their profits.

“We expect many to reduce pay for overtime and bank holidays or to flatten their structures and reduce the number of better paid supervisory roles. The next six months will show the effect any ‘levelling down’ of wages has on the workforce, and long term we believe there will be job cuts.”