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Minimum wage rise risks redundancies, warns recruitment giant

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Jeremy Hunt’s decision to increase the national living wage by 10pc could lead to employers making redundancies or scaling back hours, the boss of recruitment giant Reed has warned.

James Reed said the recent lift from £10.42 to £11.44, announced by the Chancellor in last month’s Autumn Statement, will pile pressure on companies already struggling with high labour costs.

He said: “My concern is that the rate of increase in the national living wage has been fast and the cost to a lot of employers will be considerable.

“And will that mean they make decisions to employ fewer people at that level or to give them shorter hours?

“I am in favour of people being paid more but it depends how fast and far you go.”

The Treasury has hailed the uplift, which will come into force from April, as the largest ever cash increase to the national living wage, claiming it is the equivalent of £1,800 a year for workers on the lowest income.

However, Mr Reed suggested the impact on companies has not yet been properly addressed.

He said: “If you’re a retail business and you have a lot of people on lower wages and the cost goes up 10pc in one go, how are you going to cope? What decisions is that likely to lead you to make?

“People might be earning £11.44 an hour but they might end up getting fewer hours of work.”

Reed, who runs the eponymous recruitment website founded by his father Sir Alec, said he has also seen the emergence of an “in-person premium” across the labour market, meaning employers are having to pay more for staff who cannot work from home.

He said: “We’ve seen the fastest wage rises in sectors like retailing, manufacturing and social care.”

This could spark wage disparity across companies, Mr Reed said: “I think management should be really careful around this issue because if certain parts [of a business] have to attend in person and others don’t, then how are you doing to ensure they feel like they are being fairly treated.”

He said more than 2m job vacancies have been advertised on Reed’s website this year, which is 18pc lower than in 2022. That is despite applications rising by 29pc.

Mr Reed voiced his concerns about the labour market amid a campaign to boost Christmas donations for his charity, The Big Give.

He said that a recent survey conducted by The Big Give found that 25pc of people will not be able to give as much to charity this year because of the cost of living crisis, potentially leading to more than £3bn in missing donations.

As a result, he wants richer individuals and corporations to do more.

He said: “The data suggests that corporations and the wealthy have been giving less to charity and that’s not a good thing.”

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