The impact of the National Living Wage on a Commercial Cleaning Organisation
The Autumn statement was an indication of the National Living Wage moving forward from April 2017 is nearly upon us and for SMC Premier Cleaning we wait for the announcement of the new National Living Wage from April 2017.
Last year the service sector was hit by a “ double bubble” , firstly there was the precedented Minimum wage increase that we were made aware of back in April 2015 by the LPC ( Low Pay Commission) which was a 20p increase from £6.50 per hour to £6.70per hour this equated to a 3% increase which has been in line historically with the increases since 1999 when the then labour government.
However only 6 month’s later the Government led by the then Prime minister David Cameron and the then Chancellor George Osbourne introduced an unexpected National Living Wage which would commence from October 2015. This was an increase from the then Minimum wage of £6.70 per hour to a now increase of £0.50p per hour to £7.20 per hour.
Now this unexpected increase of an additional £0.50p per hour equated to an increase of 7% which historically was not in line with the previous yearly increases of 3%.
All of a sudden in the space of 6 months the Adult rate for the Minimum/National living wage equated to a 10% increase.
For a Commercial Cleaning contractor like ourselves the expectation is that we pass this increase on automatically to all of our Clients as it is a statutory payment to all staff that we employ however as well as a 10% increase In costs what wasn’t taken into account is all of the additional costs that have to be incurred such as
Auto enrolment Pensions
Statutory Sick pay
Increases for Supervisors in line with the National Living wage increases
Therefore this can be as much in some cases of a 15% increase in costs for some of our clients and with respect to our customers they may not be in a position to incur such a cost and may look elsewhere in the marketplace.
So what can we do to retain clients as well as grow your business?
What SMC Premier has and will do continually moving forward is engage with customers, are there areas of the work that we supply that we can reduce or work smarter without reducing the cleanliness and standards of Cleaning on site thus reducing the impact of the National Living wage.
By engaging with Customers through one to one meetings and discussing the impact of the National living wage we have seen our profits marginalised however we have been able to retain 95% of our customers and moving forward the process for the April 2017 increase which will be increased to £7.50 per hour which is a 5% increase on the current level of Adult minimum wage has begun in earnest.