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Retailers will ‘nip and tuck’ rather than hire younger staff to offset living wage

Supermarkets could avoid hiring over-25s to escape paying the new living wage from April, according to analysts, but clothing and footwear retailers are more likely to cut hours and scrap staff discounts to offset the cost.

In a report published last week, analysts at credit ratings agency Moody’s warned supermarkets could stop hiring over-25s, close more stores or accelerate plans to expand their online operations, requiring fewer employees.

It calculated that 6 million workers across all sectors will get a pay rise as a result of the national living wage, which chancellor George Osborne introduced in the summer budget in July. Companies will be required to pay those over-25s at least £7.20 from April 2016, rising to £9 an hour by 2020.

Moody’s said young fashion retailers such as SuperGroup and New Look will face lower wage pressures because a higher proportion of their employees are under 25. For example, 70% of SuperGroup’s workforce is under 25, compared with only a quarter of Sainsbury’s.

One managing director of a multiple agreed, pointing out that a large proportion of his staff are employed part-time and are under 25, and said he will look at other ways to offset the cost.

“There will be some nipping and tucking. There might be a temptation to lower hours. You can’t affect rent, rates and transport costs, but you can say we could have that person working until 4pm instead of 10pm on a Saturday.

“People will be more in tune with their staffing system and assessing the true costs of employment. They will look at the churn of younger people versus older employees and the cost of replacing them with agency fees and interviewing process. They will be looking at staff discount and whether they should get rid of it.”

David McCorquodale, UK head of retail at professional services firm KPMG, agreed. “Retailers will now be looking at their operating models and some will look at some of the benefits they offer.”

Michael Weedon, deputy chief executive of British Independent Retailers Association, said: “It is worth reminding retailers that they might fall into age discrimination issues if they are tempted to go down this road [of avoiding hiring people aged over 25].”

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