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Changes in National Minimum Wage and Living Wage: The Impact on Welsh Recruiters

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This article has been submitted by Recruitment Solutions Wales

2017 has undoubtedly been a year of change, especially in the forever-in-development world of recruitment. One of the biggest impacts, along with Brexit, will certainly be the rise in the minimum and living wage, with April bringing a substantial boost to workers’ pay cheques. Whilst met with mixed views, the change has naturally been intended to improve the general health of the economy and the people in it, which should in theory benefit all.

At £7.50 an hour for over 25s, the rate will go up by 30p compared to last year. There will be smaller increases for 18-20 and 21-24 year olds, to £5.60 and £7.05 respectively. With some believing increases to send ‘shockwaves’ through the industry, recruiters could be worrying that employers may start to scale back plans, impacting recruitment agencies across Wales and the rest of the country.

Pay will also be going up even further over the next few years, but why? According to sources, the Government will look to follow through on its promises to move towards a national minimum wage of £9 per hour for over 25s by 2020, with this wage update just a closer move towards that.

Impacting the jobs market in particular, Welsh-based agency, Recruitment Solutions Wales, discuss what such Government introductions mean for the industry. Caroline, a Director for the business with over 18 years experience, explains that while thrilled to offer skilled workers job opportunities that are financially rewarding, such increases almost act as a double-edged sword.

Sharing her opinion she says:

“I am of the opinion that it has posed a serious challenge to those smaller firms who engage workers primarily at the lower end of the pay scale. Employers who rely on paying lower rates will see the burden of having to increase costs which could have a negative consequence of forcing these employers to reduce their headcount and therefore unemployment would rise and some of these business’s will be forced out of business.”

However, Caroline does not believe all is doom and gloom for the jobs market, with such challenges only making recruitment agencies and employees work more innovatively and ride the waves of the industry.

“In some instances there has been a positive knock on effect to recruitment agencies such as RSW whose business is largely engaging a temporary workforce in that the said firms look to  a more flexible workforce which supports  their issues around the headache of the additional costs on their permanent headcount.  This in turn leads to more of a reliance on temporary agency workers which can only enhance our business as the need for our services is in higher demand” she continues.

A push towards modern technology

Naturally, with higher overheads for employees will come an attractive view of technology, with robo-advisors, assistants and applications now playing a key role in modern businesses from various sectors. Though companies may have been thinking about investing in new-age tech, will increases to wages be the final push they need to shift focuses?

“Employers I think have also become more cost conscious and are starting to think more about hiring and what they actually need, what they can manage with and what they can manage without and also ways in which they can get around employing extra people.  Can they use technology alongside or instead of?  This is very apparent and widespread today where self service checkouts, scan as you shop, pay at the pump, on line check in  are now the norm.  This in turn effects the recruitment industry as there are less and less people required.  They are also looking to machines and robotic equipment all of which can be more efficient and reliable and help in reducing their wage bill” Caroline explains.

Who will foot the bill?

All businesses are based on margins, with increases in overheads impacting profits year on year. While bigger wages would generally mean bigger commission for recruiters, the employers themselves are not likely to take a large increase in outgoings lightly, having to tweak the way they do business in order to protect themselves financially. Already seeing such behavioural changes, Caroline explains:

“Our clients are seeking our support in sharing some of these costs which can only mean a reduction in our margins in an industry where costs are going up and profit margins are taking a hit in an effort to retain our client business and remain competitive in one of the most competitive industries out there.”

Candidate attraction

When looking for a new job, inevitably pay plays a pivotal role in our decisions, with higher pay only increasing the number of candidates engaging with job adverts. Though job satisfaction, company culture and environment are key to attracting and retaining candidates, money is the primary reason that candidates get up and go out to work.

This is great news for Welsh recruiters, enjoying larger numbers of active candidates seeking their expert services.

Working towards 2020

Caroline is extremely confident that this latest wage hike will certainly boast its positives, believing the way the Government are working towards their 2020 vision to be pretty admirable.

“The expectation is for further hikes annually until 2020 at least which has been a considerate approach as it has fed in  gradual increases over a period of time and enables employers to adjust.   I am of the opinion that the  approach has been good and  will have a positive impact on the economy which can only be a good thing” she says.

Throughout the years RSW has been at the forefront of changes within the industry and continues to work with and support their clients in understanding these changes and more importantly, working through them together. For more information on Recruitment Solutions Wales, head over to their website today!