I always feel this time of year comes with a sense of fresh starts and renewed focus. As school terms begin and Summer holidays end, we take stock of our agenda for the work ahead. This year it’s even more noticeable because after the general election, swearing in of new MPs, initial government announcements, dealing with the appalling riots in August, and parliamentary recess, the new government gets to work on its own agenda.
One of the key issues being discussed in our industry, the wider business community and by the general public is the future of employment regulation. Labour has promised a New Deal for Workers, and this is the most tangible way for the government to deliver on its campaign rhetoric about serving working people. We have also hit a crucial policy pinch point on the National Living Wage as the rate has hit the last government’s target of two-thirds of median earnings. What happens to this rate in future?
The key principles of the New Deal for Workers are more rights to greater flexibility and more of these being available on day one of employment. The good news is that convenience stores are an exemplar of flexible working: the vast majority of flexible working requests are already accommodated, most of our colleagues are juggling childcare and other commitments which is partly why they chose to work in this sector in the first place. Many retailers use systems to allow colleagues to swap shifts themselves to maximise that flexibility. We also offer contracts and secure work, so banning some zero hours contracts shouldn’t have a huge impact on our sector.
The concern I have wouldn’t be about the principles, but about the implementation. How can we deliver certainty and simplicity? How will an employer demonstrate they have considered a flexible working request? On what grounds can they accept or decline it? This is all bread and butter stuff to regulators … but they often get it wrong, perhaps imagining large HR departments processing these requests and managing the consequences. The reality for small businesses is that the HR Director is also the FD, buying department, Operations Director and CEO, and spends much of their time behind till serving customers. Our job will be to make the processes work for everyone.
While these regulations are on our members’ radar, the National Living Wage is well-established as one of the most profound impacts on their business model. Every percentage point increase adds millions to the cost base of the convenience industry. Our colleagues should be paid fairly and the NLW has been part of making sure that’s the case. But after a series of inflation-busting increases to get to the two-thirds of median earnings target, now’s the time to reflect and consider carefully where the rate should go in the future. The government talks about taking into account the cost of living - well, that’s fine of course but would actually plot a shallower curve for the NLW rate as inflation lags behind average earnings. The Low Pay Commission has now given us an indication of how it would interpret this ambition: two-thirds of median earnings is the minimum going forward, and that would look like at least £12.10 from next April.
What all this is going to come down to are what circumstances would drive that number higher, or lower, than the two-thirds benchmark. The Commission frames this in terms of the factors that would justify a larger increase … but our members would like the impact on their viability to future planning to be taken into account too. If business investment, in-work progress, entrepreneurship or job numbers are put at risk by the new rate, there’s a case for braking the rate of increase and making sure the NLW isn’t undermining the very businesses that pay it.
The business community are rightly focused on these two policy areas, but is there another one that could hit the top of our agenda quickly - specifically around the budget on 30 October. Employer National Insurance Contributions have been sneaking up for some time now as thresholds have been frozen and more earnings have become subject to this tax. A government looking to promote investment and growth should, you would have thought, be looking at ways to reduce these and that’s what we’ve pushed for in our advice to the Chancellor ahead of the Budget. But there’s a nagging feeling that among the host of unattractive measures to raise more revenue, increasing employer NICs might seem like a low profile option. I sincerely hope not, and that the Chancellor chooses to make her first budget one that actively supports employers.
Striking the right balance on the delivery of employment law reforms, setting the cost of employment, and still delivering on their missions to get the economy growing is going to be one of the challenges the government will be judged on when they get their end of term grades.
