Earlier this month, more than 100 Pizza Hut delivery drivers for Scotland’s biggest takeaway franchisee were called to an emergency meeting and offered an unwelcome choice.
Managers of the Glenshire Group, which runs delivery outlets across Scotland, told workers they had a choice: take an effective pay cut, move to an in-store role or switch into self-employment.
The changes, bosses said, were needed to cope with increases to national insurance contributions (NICs) and minimum wage rates that take effect this week — sharply raising labour costs for employers of low-wage workers.
Bryan Simpson, lead organiser for hospitality at the union Unite, who relayed the details of the Glenshire exchange, said the changes set a “dangerous precedent” in a sector where many employers were moving workers to shorter or zero-hour contracts to cut costs.
“This is not a small business — it’s the largest franchisee in all fast food [in Scotland] moving to a self-employed model,” he said. “That really worries me for the message it could send to the rest of the sector.”
Glenshire said it had not changed workers’ contractual terms and was “engaging directly with our colleagues to understand their concerns”.
But the row reflects the pressures employers across the UK are dealing with against a backdrop of weak growth and consumer spending.
Wage bills have been rising fast for several years. But from next week, employers face a twofold problem. On April 1, the adult minimum wage will rise by 6.7 per cent, while rates for younger workers jump at more than twice that rate. From April 6, employers will pay a higher rate of NICs for any employees earning more than £5,000 a year — half the current threshold.
When chancellor Rachel Reeves announced the NICs increase in her October Budget, the Office for Budget Responsibility said most of the cost would be borne by workers through slower pay growth and higher prices, while the equivalent of 50,000 jobs would be lost through fewer roles or shorter hours.
But the fiscal watchdog did not look at the combined effect of the tax and minimum wage rises. It admitted last week that the tax rise could hit jobs more than it initially expected, because it increased costs most sharply in low-wage sectors where employers must keep raising pay, both to match the legal minimum and to motivate staff higher up the ladder.
Analysis by the Resolution Foundation shows how uneven the impact will be.
While next week’s combined changes will add 3.4 per cent to average labour costs, the increase will be 6.6 per cent for the bottom 10 per cent of earners, according to calculations by the think-tank. It will be just 1.7 per cent for the top 10 per cent.
There will be an especially stark change for part-time workers, the think-tank said. Whereas labour costs will rise by 10.2 per cent for a full-time adult earning the minimum wage, they will rise by 14.2 per cent for a part-time worker earning £10,000 a year on the same hourly rate. This worker would previously have fallen below the NICs threshold.
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Nye Cominetti, principal economist at the Resolution Foundation, estimated this would lead to a drop in employment equivalent to the loss of 85,000 employees, concentrated among the lowest paid. He forecast a drop in employment of 0.7 per cent in the bottom decile of the pay distribution.
“This is a significant number . . . which would have been smaller if policy had been better co-ordinated,” Cominetti told the Financial Times.
Data released last week by the Office for National Statistics, based on business surveys, showed the number of jobs in hospitality fell 1 per cent between September and December of 2024, while retail jobs fell 0.2 per cent on the quarter and 1.2 per cent on the year.
Sainsbury’s and Morrisons are among the big retailers who have announced fresh job cuts since the start of 2025, closing cafés and food counters to help contain cost increases.
Elsewhere, hefty increases in basic pay have come with a loss of other perks. Tesco, which will keep its hourly rate for store staff above the new minimum wage, though by a smaller margin than previously, will scrap Sunday premium payments.
There is also evidence of the cost increases holding back hiring in the wider labour market. However, the impact has not been as bad as some gloomy business surveys initially suggested, with payroll employment broadly stable since the Budget and the latest real-time data showing a rebound in postings of online job ads in February.
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James Hilton, chief financial officer at the recruiter Hays, said he was seeing a number of companies putting temporary hiring freezes in place after the Budget, along with other cost-cutting measures. The typical new year pick-up had materialised, he said, but employers were still dragging out the interview process and “punting the decision down the road”.
But Helen Dickinson, chief executive of the British Retail Consortium, warned there was a risk of the policy changes rebounding on low-wage workers in other ways, making retailers less willing to offer flexible, part-time hours or take a risk on less productive, younger hires.
This would undermine the government’s legislative drive to strengthen workers’ rights and its hopes of helping sick and disabled benefits claimants move into work, she argued.
“Is the government thinking about how all these different policies fit together? You want to get those people into work . . . you don’t want to make it any harder.”
Data visualisation by Amy Borrett
