Brent firms offered tax cuts for paying Living Wage

26 January 2015 -

Business-rate discounts await bosses in North London borough if they sign up to salary scheme

Jermaine Haughton

Owners of companies in the London borough of Brent would save thousands of pounds in annual business-rate fees if they pay their staff the Capital’s Living Wage, it has been announced. Brent Council has moved to encourage bosses to offer their employees the London Living Wage of £9.15 per hour, instead of the National Minimum Wage of £6.50 – in return for which it will shave up to £5,000 per year off the controversial tax.

Confirmation of the plan follows a preliminary statement of last November, in which the Council proposed a timetable of announcing the initiative this month, in time for active participation by April – the turn of the financial year. At the time, councillor Roxanne Mashari said: “We are committed to championing the Living Wage and tackling the root causes of poverty in our borough. We know that paying the Living Wage makes good business sense, as it incentivises staff and helps to recruit and retain the best people, while reducing absenteeism.”

From a management perspective, some bosses would certainly be persuaded that the scheme lays the foundations for a better-paid, happier and potentially more productive workforce – aside from its obvious benefits in terms of tax savings. Other councils and politicians – including, no doubt, London Mayor Boris Johnson – will keenly assess the results of the incentive, with expansion to other London boroughs and the rest of Britain a real possibility.

Among the package of discounts on offer, companies with more than 500 staff will get £5,000 off business rates per year, while the smallest firms, with fewer than 10 staff, would save £250. The Labour-run council will pay 30% of the costs itself, with Whitehall meeting 50% and the Greater London Authority funding the remaining 20%.

Almost one third of people in Brent earn less than the Living Wage and the council – which is a Living Wage employer itself – estimates that up to 200 employers in the borough will eventually take advantage of the programme.

Just a few months away from the next General Election, the scheme is a clever Labour bid to win favour from business leaders and employees alike, and chimes with Labour leader Ed Miliband’s aim to boost the Minimum Wage to £8 an hour by 2019. However, chancellor George Osborne has proposed a figure of £7 far sooner than that. While the Minimum Wage was raised by 19p last October to £6.50 an hour, the impact of that rise has been dulled by poor inflation figures.

Since the inception of the Minimum Wage in 1999, the number of employees receiving it has doubled from 600,000 people to around 1.2 million, according to the think-tank the Resolution Foundation. The organisation also reports that a further 1.3m workers are paid within 50p of that level, suggesting that compliance needs to improve.

The Brent scheme sounds like a great way to help firms recruit and develop staff. For more thoughts on that subject, sign up to this forthcoming CMI seminar.