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BrewDog, the UK’s biggest craft beer brewer, has abandoned its pledge to pay all staff the voluntary living wage in a move that points to a broader cooling of wage pressures across the economy.
The company said in a letter to staff — published on Wednesday by the trade union Unite — that new staff members would be hired at the statutory minimum wage rate, which stands at £10.42 an hour and is set to rise to £11.44 in April, rather than the higher rates set by the Living Wage Foundation that are paid at present.
Pay rates for existing staff outside London will rise from £10.90 to £11.44 in April, while the pay of employees in London will be frozen at £11.95. This is the rate set by the Living Wage Foundation, a charity that accredits employers who meet its standards on pay, to reflect the capital’s higher living costs.
The decision is likely to deal a further blow to BrewDog’s reputation as an employer. Chief executive James Watt was forced to issue a public apology in 2021 after accusations from former staff that he had fostered a “toxic” workplace culture.
But it could also point to a broader easing of pay pressures across the UK economy, after a year in which wages have grown at a record pace in nominal terms but have still barely outpaced inflation.
Bank of England rate-setters are watching developments on pay intently, because they believe high inflation will be more persistent — and interest rates will need to stay high for longer — if wages continue to rise rapidly and companies prove able to pass on the cost to consumers.
Ministers are, meanwhile, keen for living standards to rise in the run-up to the general election expected this year, and chancellor Jeremy Hunt has mandated a 9.8 per cent increase in the statutory minimum wage from April.
The BoE is worried that this rise in pay for low earners could complicate its job of returning inflation to the 2 per cent target, if it leads employers to lift salaries for staff higher up the pay scale as well.
BrewDog’s example suggests that at least some companies are finding it both harder, and less necessary, to boost wages — with redundancies on the rise and labour shortages easing.
Some economists have speculated that employers who pay the voluntary living wage at present may feel less pressure than in recent years to compete on salaries for scarce staff, especially as the gap between the voluntary living wage and the statutory rate has narrowed over time.
However, supermarket J Sainsbury, which already pays well above the statutory rate, said last week that it would raise its minimum hourly wage by 9.1 per cent from March — a move that could spur similar increases from rivals.
Next said in a trading update last week that it expected wage inflation to add £60mn to its costs in the year ahead, although the retailer noted it did not expect to raise selling prices as a result, given other cost savings and falling factory gate prices.
Bryan Simpson, lead organiser for the hospitality sector at Unite, said it was “outrageous” to withdraw the living wage pledge “during the most acute cost of living crisis in a generation”.
BrewDog, which in a 2019 blog described becoming an accredited Living Wage Employer as “one of the best decisions we ever made”, said in its letter that “hard decisions” were necessary to restore profitability and financial stability after a year of “immense challenges”.
The company said staff outside London would still receive a 4.95 per cent pay increase, with those in the capital paid 4.5 per cent above the statutory minimum.
It maintains that its overall benefits package, which includes paid sabbaticals for long-serving staff and a week’s leave for employees with a new pet, remains more generous than the industry average.