The government's decision to introduce a national living wage could cost the charity sector an additional £500m by 2020, according to a study by the Third Sector Research Centre.
In the summer Budget, the Chancellor of the Exchequer, George Osborne, announced that the national minimum wage, which is currently £6.50 an hour for those aged 21 and over, would be replaced by a national living wage from April 2016.
He said this would be set at £7.20 an hour for those aged over 25 from next year, before rising to at least £9 an hour by 2020.
Stephen McKay, professor of social research at the University of Lincoln and a TSRC research associate, says in the briefing paper Accounting for the Impact of the Forthcoming National Living Wage on the Third Sector that £7.20 an hour would cost the sector about £100m, and a further rise to £9 an hour would lead to an additional bill of £400m. The sector would face a total extra bill of £500m by 2020, he says.
The paper says that increasing the pay rate to £9 an hour would affect the earnings of about 250,000 people – almost three in every 10 of the third sector workforce. But that figure could be higher because employers might have to raise the pay of workers earning just above the new wage level, it says.