The Living Wage – Better for Staff, Better for Businesses
The summer of 2015 saw the Chancellor of the Exchequer announce government plans to introduce a compulsory minimum wage premium for all staff over 25 years of age. Referred to as the ‘national living wage’, the government rate was introduced in April 2016.
Not to be confused with the national minimum wage, the national living wage means that workers aged 25 years or over (and not in their first year as an apprentice) are legally entitled to receive a minimum of £7.20 per hour.
Whilst the national living wage is now a legal requirement and compulsory for all businesses, the Living Wage is a voluntary hourly rate set independently and updated annually. Calculated according to the basic cost of living in the UK, the current Living Wage in the UK is £8.25, rising to £9.40 an hour in London. Employers are able to choose whether they pay the Living Wage and many employers have chosen to adopt the Living Wage despite it meaning they’re shelling out more in staff wages. But why?
Well, aside from the support the Living Wage has received from the Prime Minister at the time the campaign was launched, David Cameron, as well as cross party support, the Living Wage has actually proved good for business. We’ve spoken to Sandy Aird the Managing Director of Enhance Office Cleaning Ltd a strong advocate for the Living Wage to find out the impact it has had on his business and the cleaning industry as a whole.
What impact do you think paying the Living Wage will have on the contract cleaning industry?
“Research carried out by Queen Mary University of London between 2011 and 2013 indicated that companies paying the Living Wage benefitted from improvements in the stability, attitudes and characteristics of the workers. Paying the Living Wage has PR benefits, including helping to attract new business and in recruiting staff. Where the Living Wage is paid it contributes to workers and clients perceiving a greater value in the job being done.”
What made you decide to offer your staff the Living Wage?
“It is only right in my view that any working person in our society should be paid at a level where they can consistently achieve a basic standard of living. In 2010 Enhance was quite small, but expanding, so I decided if I were to try to convert all my clients to the ‘Living Wage’ it would be easier to do this sooner rather than later. I contacted all of our non-Living Wage clients telling them that Enhance had taken a policy decision to implement the Living Wage as a basic rate of pay across the whole business and giving them three months’ notice of this intention. After discussions about costs, work specifications etc. 21 of our 23 clients agreed. In 2016 we now have 60 clients, most of whom support the Living Wage and 85% of our staff are paid Living Wage or higher.”
What impact has this had on your customers and how do they feel about it?
“Generally the relationship we have with our clients is more secure and they have a better appreciation of the service provided.”
What has been the reaction from your staff? Has it affected staff retention?
“There is undoubtedly a positive impact at various levels on our staff. Between 2010 and 2011 when we converted most of our staff from lower pay rates to the Living Wage our staff retention increased by 50%.”
What do you see as the future of the contract cleaning industry and is the Living Wage the way the rest of the industry is going too?
“The contract cleaning industry will continue to expand and it will increasingly adopt a more responsible approach towards the employment terms offered. I hope that more and more contract cleaning companies will negotiate a Living Wage and sell the benefits of paying a Living Wage to their clients. Ultimately it is the client who decides through their budgeting and choice of contractor. The success of The Living Wage Foundation in signing up more and more organisations who commit to paying a Living Wage suggests that paying it will continue to gain popularity.
As you know, Caroline Reilly does a lot of speaking engagements about the Living Wage and you work closely with her, what have you done together? And has this relationship helped your business?
“Caroline and I presented ‘the benefits of paying a Living Wage’ at The FM Show at Excel in 2015 and in 2016. Knowing Caroline so well is helpful in supporting our clients who want to advertise themselves as Living Wage Employers. Having a close relationship with The Living Wage Foundation makes us attractive to the right kind of clients and demonstrates that we are not just paying lip service to paying a Living Wage but really do believe it is the right thing to do.”
It’s not just the contract cleaning industry that has reaped the rewards of the Living Wage, Livingwage.org.uk reports “An independent study examining the business benefits of implementing a Living Wage policy in London found that more than 80% of employers believe that the Living Wage had enhanced the quality of the work of their staff, while absenteeism had fallen by approximately 25%. Two thirds of employers reported a significant impact on recruitment and retention within their organisation. 70% of employers felt that the Living Wage had increased consumer awareness of their organisation’s commitment to be an ethical employer.”
Whilst the government has instructed the Low Pay Commission that by 2020 the national living wage for staff aged 25 and over should reach 60% of median earnings, meaning a rise to around £9 per hour, many hope that, by then, most businesses will already have adopted the Living Wage which at that point based on current trends is likely to be around £10.60 per hour. Aside from the obvious benefits to staff pockets, increasing wages has actually had a positive effect on many businesses bottom lines thanks to increased employee satisfaction, productivity and staff retention, a reduction in absenteeism and earning a reputation as an ethical employer.