New living wage set to impact beauty industry

Chancellor George Osborne said the Government would introduce the national living wage at a rate of £7.20 per hour from April 2016.

It will apply to staff aged 25 and over and will increase to £9 per hour by 2020.

This could have a significant impact on salons, where junior workers often start on a lower rate. However, the fact that it will only apply to over-25s should allow some leeway with new therapists, who are often much younger.

The Budget also included some measures to offset this increase in business costs, including an increase in the Employment Allowance to £3,000 and a reduction in corporation tax from 20% to 19% in 2017 and 18% in 2020.

Many salons will also welcome the proposed simplification of the tax process, and mobile therapists in particular will welcome the freeze on fuel duty.

Small businesses are also excluded from the new Apprenticeship Levy, which will see larger businesses become responsible for funding apprentices’ external training.

Commenting on the announcements, John Allan, national chairman of the Federation of Small Businesses, said, “The increase in the Employment Allowance to £3,000 is welcome although, for many small businesses, it is unlikely to fully off-set the increase in costs brought by the new over 25s National Living Wage rate.

He added, “FSB’s research shows that in the past the Employment Allowance has enabled members to increase wages and spending on staff training. Going forward we expect the allowance to primarily be used to meet higher wage costs, as a result of the new National Living Wage.”