David Ward – Who pays for the National Living Wage?

David Ward

In his latest blog for Infologue.com, David Ward of Ward Security discusses the National Living Wage. David writes: “When the new mandatory National Living Wage (NLW) came into force on April 1st, it required all employers to pay workers aged 25 and over at least £7.20 an hour. There can be little argument against the need to ensure lower paid workers earn enough without needing additional top-up benefits, however, the challenge facing many companies – especially those working on small margins and with a large workforce – is how to incorporate that additional cost into the business model.

“Many security companies will fit into this definition. The security industry has always suffered pressure from customers who need the service, but who also demand a lot for a little. So margins can be difficult to maintain. At the same time the provision of security services is one which requires a sizeable workforce to deliver effectively.

“There are other contributory running costs that need to be considered, such as fuel for transport. As I write, the RAC is warning that the ‘good times’ of cheap fuel are over as cost of petrol rises for the first time in eight months. There is also the new Apprenticeship Levy which will come into effect almost exactly a year after the introduction of the National Living Wage. The levy will require all employers with a payroll in excess of £3 million to pay a levy set at 0.5% of the employer’s total wage bill.

“Instead of consistently making sweeping changes to employment legislation and benefits, the Government should be talking to service provision industries which are collectively major employers, but which suffer disproportionately as many businesses will be low margin/high labour companies.

“At Ward Security we are lucky that most of our clients pay their staff above the National Living Wage already, and many of our blue chip clients work with us to ensure that the wage rate of our staff is reviewed regularly to ensure we can retain the best people. But many smaller companies and new players will not be in such a fortunate position.

“The National Living Wage in conjunction with the Working Time Directive was where the industry wanted to go. However, most security officers can’t have both as their hourly rate may be above the NLW. The number of hours they are offered drastically reduces their annual salary, so they need to then work additional hours to make their money back up.

“Simply passing on costs to the customer is not as straightforward as might seem. In reality, putting up your prices is likely to achieve little more than a reduction of your contract, with no increase in revenue, but leaving you with the same headache of a larger wage bill. Stuck between a rock and a hard place, the only realistic solution is to self-assess not only our own operations, but our contracts with our customers to identify ways in which they can be made even more efficient.

“This is a task many security suppliers will have been engaged in for many years already. Margin pressure is nothing new, and the conveyor belt of new emerging technologies has served to ensure the industry keeps evolving to incorporate them. However, the National Living Wage adds further heavy pressure to continue the self-assessment process.

“We will undoubtedly see a new battle opening up where customers come to realise they can reduce their own costs by consolidating services. It is not uncommon to find sites employing services from more than one supplier. In such a battle for territory the winners will be those who can offer the most efficient and cost-effective single replacement umbrella solution, and, crucially, add value without any loss of professionalism. The first victories will be scored by security companies that are not slow in pointing this out to customers at the same time they offer a solution.

“The customer still needs to feel they are getting a great service, so you have to worry for those security providers that do not have the infrastructure, experience or capacity to deliver”.

Ward Security Website

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