New research by the Social Market Foundation, in partnership with Adecco Group UK & Ireland, reveals that a quarter of private sector employees will be directly affected by the new National Living Wage (NLW).

The research shows that workplaces severely affected by the new National Living Wage tend to have low-skilled employees and are much less likely to offer in-work training.

This new research supports the CIPD’s Labour Market Outlook report that finds UK pay rises will fall back in 2016 partly due to the NLW. The NLW is set to take effect in April 2016.

The Social Market Foundation states that a large number of private businesses face a significant challenge in coping with a rising wage bill and pressure on productivity.

The retail, wholesale and hospitality sectors are among the most severely affected by the NLW. Almost a fifth (18%) of employees who will benefit from the new rate are younger workers and workers aged 50 or over make up a third of those who will benefit. Moreover, the NLW cut-off at age 25 means businesses will be faced with potential discrepancies in wages across their younger workforce.

28% of workers who will benefit from the new NLW are in elementary occupations which require no formal qualifications. Typical job roles include labourers, cleaners and shelf-fillers. Caring, leisure and other services and sales are also significantly affected. Four in ten of those who benefit from the NLW have no qualification or are only educated to GCSE level.

“The National Living Wage has the potential to reduce wage inequality and improve people’s lives across the UK,” Alex Fleming, Managing Director and member of the Board of Directors, Adecco Group UK and Ireland, said. “The challenge for businesses, particularly in sectors including retail, wholesale and hospitality, will be in mitigating the impact of the new rate across their workforce and boosting productivity to avoid job losses.”

Adecco suggests that businesses should consider training as one of the best ways to respond as many workers eligible for the rate are low-skilled.

Workplaces severely affected by the new rate are much less likely to provide ongoing training and development opportunities to their staff, with 46% providing no training at all, or providing training to less than a fifth of their experienced staff in a six month period. The prevalence of part-time workers may also present particular challenges to businesses because the case for investing in their skills may be weaker than for full-time workers.

The new research highlights that for 40% of workplaces severely affected by the NLW, financial performance is a key factor in determining pay, while 47% have traditionally linked salary decisions to the minimum wage. This raises important questions about how these organisations can equip themselves and their staff to cope with rising wage bills.

“The low stock of skills amongst those affected by the new National Living Wage, and the relative lack of access to in-work training, means that businesses and the Government will have to act to make sure that workplace productivity rises alongside the new regulated wage,” Nida Broughton, Chief Economist at the Social Market Foundation, said.

 “If businesses can increase productivity there is less likely to be a risk of higher unemployment as a result of the introduction of the NLW, and workers will be more likely to benefit,” Broughton said.