Living Wage: Can you afford to give your staff a pay rise?

Around 150,000 workers across the UK are a about to get a pay rise because their employers have agreed to pay all staff the Living Wage.

Confusingly, this is different from the Government’s National Living Wage and National Minimum Wage, which are legal requirements.

The Living Wage is set by the Living Wage Foundation, calculated independently as the amount people need to get by, and is billed as a “fair day’s pay for a hard day’s work”.

The figure rises annually in November during ‘Living Wage Week’ (November 5-11, 2017) and this year is set at £8.75 an hour outside London, up from £8.45 in 2016, while in the capital the new rate is £10.20, up from £9.75.

That compares with the legal minima of £7.50 an hour for over-25s, £7.05 for those aged 21-24, £5.60 for those aged 18-20 and £4.05 for under-18s.

The Living Wage is paid voluntarily by 3,600 employers who have pledged to implement the increase by the end of their financial year.

The whole issue of minimum wage rates has been a hot potato since Tony Blair’s government introduced the National Minimum Wage in 1999.

Rob Johnston, Chief Executive of Cumbria Chamber of Commerce, said: “We are uncomfortable with the principle that government should intervene in the market to impose minimum pay levels.

“The intervention is well intentioned but, if minimum rates are set too high, it will destroy businesses and jobs – hurting the low-paid workers that the Government is trying to protect.

“Businesses are struggling to contend with other costs such as higher raw material prices, rising business rates, pension auto-enrolment, the apprenticeship levy and the immigration skills charge.

“Higher wage costs could be the straw that breaks the camel’s back.”

If minimum rates are set too high, it will destroy businesses and jobs – hurting the low-paid workers that the Government is trying to protect.

Rob pointed to the British Chambers of Commerce’s annual workforce survey, which reveals that 24% of employers in the North West believe that the National Living Wage has “significantly Increased” their costs.

With more increases planned over the next three years, nearly half of the businesses questioned were planning to raise prices as a result, while just under a quarter expected to scale back recruitment.

He added: “The Living Wage Foundation’s Living Wage is different because it’s voluntary. Nobody has to pay it. It’s a judgement every business has to make.

“Many that have opted for accreditation already pay their staff above the threshold, so it hasn’t cost them anything to make that commitment, but they’ve decided that accreditation will enhance their reputation and make them more attractive to potential employees.

“We estimate that 80% of Chamber of Commerce members nationally already pay the Living Wage.

“Many of those that don’t are in sectors such as care and cleaning where commercial pressures make it unviable. Care homes, for example, are dependent on fixed local authority contracts and they have been repeatedly squeezed as councils seek to reduce their outgoings.

“This isn’t a case of Scrooge-like employers exploiting workers, it’s commercial reality. It’s important that politicians and campaigners realise this and that low-paid work is preferable to unemployment.

“Care is a sector that should be expanding as the population ages but instead care homes are closing because the model isn’t viable – they are also heavily dependent on migrant workers who may leave after Brexit.”

Accredited Living Wage employers in Cumbria include national players such as Nestlé, GSK, Nationwide Building Society, Santander, Lloyds Banking Group, Rathbone Brothers, retailers Lidl, Lush and Majestic Wine, and the plant hire business A-Plant.

Some local businesses have signed up too although, in most cases, the vast majority of their staff were already paid above the threshold.

Glasstap, in Alston, provides training materials to trainers.

Managing director Rod Webb said: “Everybody we employed was already above the Living Wage level but we wanted to make a statement.

“Our business is about valuing people in terms of developing them and unlocking their potential. The Living Wage is part of that.

“We gained the Investors in People accreditation for much the same reason. It’s the message that we want to give out to our customers – we want to encourage them to value their people too.

“It’s about us practising what we preach.”

Glasstap carries the Living Wage logo on its website, letterheads and emails.

Rod Webb

Rod added: “I’d like to see other organisations following our example. The pay differentials between chief executives and the people doing the day-to-day work can be astronomical and need to be reduced.

“I understand that this is down to market forces, but people are becoming more and more aware of how organisations operate and ethics is part of that.

“If you treat your staff well and respect and reward them, you get better results and higher staff retention.

“A high turnover of staff is one of the biggest costs a business faces. If you can reduce that, paying the Living Wage may be less costly than you think.”

KT’s Coaches became a Living Wage employer in 2016. The coach operator at Crooklands, near Kendal, employs 15 people and operates nine vehicles. Around 500 children travel to school each days on its coaches.

Yvette Wheeler, a partner in the business, said: “I signed up because we already pay above the Living Wage and I’m proud of that.

“I’ve always felt that if you’re doing the job right and making a nice living out of it, you should share that with the people who work for you.

“People know we’re a good company to work for, and that means that when we need to recruit we get a good number of applicants to choose from.”

Story Contracting, in Carlisle, became the first Cumbrian construction company to become a Living Wage employer in 2015.

It actively promotes the initiative, carrying the Living Wage logo on its website and the hashtag #livingwageweek on recruitment Tweets.

John Story, finance director, said at the time: “Although we had very few employees below the Living Wage, the change is still a significant one for those individuals and for us a responsible employer.

“This is not just a campaign for big PLCs and we are proud to now carry the Living Wage Employer mark.”

Other Cumbrian employers to voluntarily sign up include Threlkeld Coffee Shop, South Lakes Housing, and Workington and Penrith town councils.

Cath Purdy, Chief Executive of South Lakes Housing, said: “We signed up to the Living Wage because we value our staff and we depend on their commitment to help us deliver our objectives. We have been able to offer wage increases to apprentices over the age of 21 with many continuing to stay with the company.

“It makes perfect business sense to us, without a local workforce we cannot develop the homes this county desperately needs and we cannot deliver great service to our customers”.

The Living Wage Foundation says that the 2017 increases were largely driven by higher food, transport and housing costs.

It cites research by IHS Markit for KPMG showing that 5.5m people – 21% of the UK workforce – are paid less than its Living Wage, and 634,000 of these are in the North West, including Cumbria.

The pay differentials between chief executives and the people doing the day-to-day work can be astronomical and need to be reduced.

Those most likely to be paid less are bar and waiting staff, launderers, dry cleaners and pressers, kitchen and catering assistants, cleaners including vehicle valeters, leisure and theme park attendants, and hairdressers.

Katherine Jackson, director of the Living Wage Foundation, said: “Great businesses know that, even during these tough times, not only is fair pay the right thing to do but paying the real Living Wage brings big benefits.

“Nine out of 10 accredited Living Wage employers report real benefits including improved retention, reputation, recruitment and staff motivation.”

Meanwhile, Rob Johnston, points out that pay isn’t the only factor in improving staff recruitment and retention rates.

He said: “We encourage businesses to value their staff but that isn’t only about pay. Staff training and career development is part of the mix and can help people feel valued and so improve retention rates.

“Cumbria Business Growth Hub is running the Profiting Through Skills campaign, which offers free training to SMEs that want to upskill their workers or recruit apprentices.”

To take advantage of the free training on offer, or find out more how Cumbria Business Growth Hub can help your business boost productivity, call today on 0844 257 84 50.

The funding that supports the Growth Hub comes from a range of sources including Cumbria Chamber of Commerce, the European Regional Development Fund, Allerdale Borough Council (Sellafield Ltd’s Allerdale SIIF, distributed by Allerdale Borough Council), Barrow Borough Council (FEDF Coastal Communities Fund Supply Chain Initiative, the Coastal Communities Fund is funded by the Government with income from the Crown Estates marine assets; it is delivered by the Big Lottery Fund on behalf of UK Government), Carlisle City Council, Eden District Council, South Lakeland District Council and Cumbria LEP. 

The Growth Hub is receiving up to £2,528,767 of funding from the England European Regional Development Fund as part of the European Structural and Investment Funds Growth Programme 2014-2020.  The Department for Communities and Local Government is the Managing Authority for European Regional Development Fund. Established by the European Union, the European Regional Development Fund helps local areas stimulate their economic development by investing in projects which will support innovation, businesses, create jobs and local community regenerations. For more information click here.