Mark Childs of Total Reward Group discusses the ramifications of the Summer Budget for reward and employee benefits

Westminster

The first all-conservative Budget for 18 years could have a profound impact on the provision of employee benefits, says Mark Childs, managing director, Total Reward Group.

Speaking at Reward’s ‘Making Reward Personal’ conference, he predicted the introduction of the National Living Wage (to be £9 per hour by 2020) would see benefits cut.

“The impact of the Living Wage will be the equivalent to giving lower paid staff a 6% pay rise every year for the next five years,” he said. “I firmly believe that in low pay sectors, companies will be spending all their money on pay, rather than benefits. I also believe it will suddenly make employing under 25s much more appealing [those under this age won’t receive the Living Wage].”

Childs was summarising the key parts of the Budget against a backdrop of improved employment (78% of men and 69% of women are now employed), and declining unemployment. Unemployment now stands at 5.5%, which is technically near full-employment.

He said: “This will create skills shortages, and hotspot areas where finding good people is at a premium. This should filter down into higher pay – but it’s probably not because employers suddenly feel more generous; it’s just more that they face severe skills shortages.”

According to Childs, some areas of the country – such as Cambridge – are so close to full employment that employers need to post five job ads before they even get one response. In other areas though, (such as Salford), a job ad generates 24 responses.

Another feature of the Budget was the 1% pay cap for public sector workers for the next four years. “I can’t believe this will last for the full four years,” he said. “There will be strikes, because workers will be seeing private sector wages rising.”

Childs said: “While we all seek to be employers of choice, all employers will have to operate within the context in which they find themselves.”