All you need to know about the living wage
As businesses start to respond to the government’s introduction of the National Living Wage, what do you need to know about chancellor George Osborne’s new minimum level of pay?
Furniture giant Ikea is the first national retailer to announce it will pay staff more than the National Living Wage introduced by chancellor George Osborne.
Ikea has vowed to pay all its 9,000 UK workers at least £7.85 an hour from April 2016, with employees in London receiving £9.15 an hour. This is the pay rate set by the Living Wage Foundation so workers can afford the minimum acceptable standard of living in the UK.
But this is higher than the National Living Wage introduced in the Budget earlier this month, when the chancellor introduced a new living wage of £7.20 an hour for those aged 25 and over. Currently, the existing minimum wage for those over 21 is £6.50 an hour, and this will still apply for those under the age of 25.
Increasing the minimum wage for those over the age of 25 is expected to increase earnings by about £4 billion, while The Office for Budget Responsibility also reports that staff are expected to work a total of 4 million fewer hours per week by 2020 because of the initiative. This is due to the employment of around 60,000 fewer workers by 2020, in addition to a reduction in the number of average hours worked by staff.
To date, the business community remains split on whether a higher minimum wage is feasible for many companies, especially during this period of very poor productivity.
But while there are still doubts surrounding the new National Living Wage, here are three companies who have decided to go above-and-beyond this new requirement and are already paying the higher rate of pay set by the Living Wage Foundation.
The Catterall-based family company has been a supporter of a higher minimum wage long before the chancellor’s announcement, paying all its workers at least the higher-rate living wage for the last two years.
Specialists in designing and engineering products tailored for the agriculture, construction and renewables sectors, the firm’s joint managing director Dan Collinson said paying workers more fairly is as much an ethical decision as a financial one.
“We’ve always applied that sort of ethos,” he said. “Collinson is a family firm; my grandad started the business. Their ethos was always to pay what they considered a good wage, rather than saying what’s the minimum we can pay someone.
“We’ve been registered as a living wage employer since December 2012. We like the fact we are a living wage employer. It wasn’t a hard decision.”
And the move doesn’t seemed to have deflated the business’ performance or recruitment, with its staff numbers increasing to 130 from 85 over the last 18 months and a new £1.5m research and design centre due to open later this year. (Source)
Part of its attempts to rebuild its reputation after several troubled years, including its near-extinction, the Co-operative Bank received its living wage accreditation at the start of July.
As well as agreeing to compensate its staff with the higher minimum hourly rate, the bank promises to work with suppliers and third-party contractors to implement measures outlined by the Living Wage Foundation.
The firm’s decision was led by its recently launched Ethical Policy framework, which polled 74,000 customers and employees to find out their opinion of the ethical policies the bank should implement. More than half (59%) of those who took part in the poll were in favour of the bank introducing the living wage.
However, the living wage has not become a realisation for the Bank’s sister company and retailer the Co-operative Group, although it recently agreed a big 8.5% rise for its lowest paid.
In a statement, the retailer said: “The Group has been supportive of the principle of a statutory floor for basic pay and supported the introduction of a National Minimum Wage. However, the Group believes the living wage calculations need to be broader, as its reward package includes more than just basic pay, and that other elements of the reward package should be taken into account.”
Initially starting out as a London living wage employer in 2005, the multi-national insurance giant extended the policy across all of its UK operations last summer, believing it is beneficial to service levels and cost effective in the long-term.
As well as providing Aviva a platform to make a political and social impact on society, the decision to pay the living wage was well-received by suppliers’ operatives who were at the time being paid industry regional pay rates.
However, the leading British life and pensions provider has faced a number of challenges when introducing the scheme. Increasing the hourly pay rates for cleaning operatives, for example, led to most of the cleaning supervisors being paid the same as their team members, thus they either resigned or requested a demotion.
In response, Aviva increased supervisor rates to maintain existing pay grades for different ranking staff, and reported an overall uplift in staff morale. (Source)