Osborne warns firms not to cut perks on back of National Living Wage

Shop workers are amongst those expected to benefit from the National Living Wage

Companies which cut staff perks to compensate for the higher cost of the new minimum wage should be mindful of the risk to their reputation, chancellor George Osborne has warned.

"It's not the spirit of the law. Companies should be much more careful about their reputation," he told ITV.

The £7.20 hourly rate for workers aged 25 and over came into effect in April.

Many firms have cut overtime pay rates or benefits such as free lunches to fund the rise in basic pay rates.

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Mr Osborne's warning comes after a debate in the Commons on Monday on the impact of the 50p hourly increase in the National Living Wage (NLW), said profitable firms trying to "evade the spirit" of the new laws would face government pressure.

"I promise you that we will use the full force of our office, little though it sometimes feels, to put pressure on those companies to live up not only to the legal obligations, which are our job in making legislation in this House, but to their moral obligations, which are the ones that we feel matter a great deal more," said Conservative minister Nick Boles.

A motion warning the wage changes have left thousands of low-paid workers "significantly worse off" and calling on the government to ensure they are protected was passed unopposed.

Nearly 140,000 people signed a petition protesting against changes to Sunday and bank holiday pay at B&Q

DIY chain B&Q, supermarket Tesco, coffee chain Caffe Nero and the John Lewis Partnership have all recently reduced some staff payments or perks, but most have said the moves were unrelated to the 50p-an-hour increase in the National Living Wage (NLW).

B&Q initially said it planned to cut Sunday and Bank holiday pay rates in exchange for lifting the lowest hourly rate for all staff to £7.66 from 1 April, 46p-an-hour above the NLW.

It later decided to extend compensation for workers who were adversely affected by this change to two years, from one after nearly 140,000 people signed a petition against the cuts.

In April, Caffe Nero said it would no longer give its staff a free lunch when they are on shift, as part of a "pay review" introduced in response to the new National Living Wage.

Tesco says the average hourly rate for its staff is £7.62 an hour

The John Lewis Partnership - which includes supermarket chain Waitrose - said it stopped so-called premium payments - higher hourly rates for overtime or Sunday working - from 1 February for new workers after realising competitors did not offer the same deal.

"Premium payments are not a feature of the market," a spokeswoman for the group told the BBC.

She said the decision was announced in September last year and was unrelated to the introduction of the NLW. She also said Waitrose average hourly pay rate, outside London, was above the NLW at £7.80.

Similarly, Tesco said from 3 July all staff who worked on Sundays and Bank holidays would be paid at time-and-a-half, rather than the current double time rate received by staff on older contracts, but said staff negatively affected would receive a lump sum covering 18 months of the pay difference.

It also said the average hourly rate for staff was above the NLW at £7.62 an hour.

The Office for Budget Responsibility (OBR) - the government's regulatory watchdog - has warned that 60,000 jobs will be lost by 2020 as a direct result of the National Living Wage (NLW).