The boss of a fast-growing Sheffield cleaning firm has warned of the ‘pincer effect’ of the National Living Wage put the squeeze on companies.
Hayley Gillbard, aged 26, of Crystal Clean Service, says the Government-ordered universal pay hike will increase costs and cut profits at her business.
But at the same time customers could demand a price cut while suppliers could raise theirs.
From April, workers aged over 25 will receive a minimum of £7.20 per hour, leaving small firms “scant time to prepare,” Hayley said.
She added: “On the face of it, it’s to be applauded because it represents a modest, and much-needed, pay rise for many hundreds of thousands of the lowest paid people.
“But SMEs need to be aware of the pincer effect that could squeeze them from both sides.
Payroll expenditure is set to rise, and margins will be eroded, but SMEs will also notice customers and suppliers cutting costs and raising prices for exactly the same reasons.
“Plenty of employers want to raise the wages of their lowest paid employees but we also recognise that there is a cascade effect that accompanies it.
“If I increase the hourly rate of my lowest paid employees to the level of, or close to, their supervisors, it is only fair to raise my supervisors’ pay, and so on.
“Labour intensive businesses depend on their lowest paid staff who make up the bulk of the workforce. Clearly, even a small increase in pay across several grades quickly adds up to a significant increase in overheads.”
Hayley founded the company when she was only 18. Today it employs 64 and has just moved to bigger premises on Neepsend Triangle, Burton Road.
She added: “As part of our preparations at Crystal Clean Service, we are having face-to-face meetings with all our clients to apprise them how their service and costs will be affected.
“Similarly, we are having meetings with all of our suppliers to ensure we know which ones will be raising their prices, and which ones are able to offer us fixed-price supplies for agreed periods.”