George Osborne has warned companies cutting staff perks to pay for his “national living wage” that they are not acting within the spirit of the law and should “abide by their responsibilities”.
A string of companies have withdrawn benefits including Sunday pay, free food and overtime ahead of the introduction of a new minimum wage for over-25s.
Companies named in the House of Commons yesterday included coffee shops in London such as chain Eat, Waitrose supermarkets and sandwich manufacturer Bradgate Bakery.
Before the National Living Wage had even been implemented, a B&Q manager had accused the DIY retailer of using it as an excuse to cut perks including time-and-a-half Sunday pay. A petition urging a rethink has so far attracted more than 139,000 signatures.
Caffè Nero also suffered from negative publicity this month when it axed free lunches for employees. However, like B&Q, it claimed the move was unrelated to the NLW.
The chancellor told ITV’s The Agenda programme that companies cutting such perks made him angry.
“We will enforce the letter of the law but we want companies to also live by the spirit of the law,” he said.
“But of course what you get is some companies cutting the lunch break, or cutting the free lunch they were providing,” he said. “That may not be the letter of the law and we don’t in this country prescribe what everyone eats for lunch, but it’s not the spirit of the law.
“I think that companies these days should be much more careful about their reputation and much more aware of their social responsibility to their workforce as well as to their community.”
The chancellor’s comments come after MP’s debated the problems around the introduction of the national living wage on Monday and called for penalties for businesses that “deliberately circumvent” the wage.
Charles Cotton, performance and reward adviser at the CIPD, said he had some sympathy for employers struggling to meet an increased salary base, especially smaller companies.
“This was sort of sprung on employers – they only had about 12 months to prepare, and it’s an additional cost on top of the apprenticeship levy and auto-enrolment,” he said. “I would have liked to have seen some form of government help to manage the costs, especially for smaller firms.”
Moreover, Cotton added that as the wage is likely to increase to at least £9 by 2020, that all employers should ‘start seeing payroll as an investment rather than a cost’. Axing benefits that enjoyed low-take up and focusing on productivity would be a more sustainable way to address cost issues, he said, and there was a broader advantage to not “following the herd” by reducing benefits.
Siobhain McDonagh MP, who called the backbenchers debate, said the chancellor had handed companies a £15bn cut in corporation tax to help pay for the rise in the minimum wage:
“Osborne guaranteed everyone a pay rise in his Autumn Statement last November. People at the very least would expect they’d take home more rather than less. The government needs to do whatever it can to close this loophole and use its moral firepower to put pressure on firms.”