By Deborah Moon, Reward Blogger
Despite some recent encouraging signs of economic recovery, many employees are continuing to experience declining levels of pay in real terms, with a consequent squeeze on living standards for themselves and their families. With increasing concerns being expressed about a growing wage gap within the UK economy and perceived pay inequality between those at the top end of the labour market and those in middle to low income brackets, commentators have drawn attention to an apparent shift towards a “two-tier workforce” and polarisation of the jobs/skills market.
It is within this overall context that there has been a growing interest in, debate about, and support for the concept of the Living Wage from a number of different organisations and individuals. For example, at the recent Labour Party Conference, Ed Miliband promised a “race to the top” in terms of improving workers’ pay levels under a future Labour Government, the Archbishop of York, Dr John Sentamu, referred to existing salary levels as a “national scandal” and the detrimental impact of low pay in relation to gender equality, and a growing number of employers have either committed to pay the Living Wage or work toward that as a policy objective.
Unlike the National Minimum Wage (NMW) which is a statutory requirement, which sets a mandatory “pay floor” with which all employers must comply, and which has enforcement and financial penalties attached to it, the Living Wage is a voluntary concept. Its underlying rationale is to ensure a level of pay which covers the basic costs of living so that employees and their families can live free from poverty. It seeks the commitment of employers to ensuring that, as a minimum, directly employed and contracted staff are paid an identified living wage rate (there are, in fact, two Living Wage rates, one for London (reflecting the higher costs of living in the capital) and one for the rest of the UK).
A recent report by the Resolution Foundation Low Pay Britain 2013 once again highlighted the incidence of low pay, identifying those most at risk including female workers, the young, those in lower skilled occupations, part-time and temporary workers and those in hospitality, retail and care.
Similarly, the report of the Social Mobility and Child Poverty Commission, State of the Nation 2013: social mobility and child poverty in Great Britain, drew attention to the polarisation of the labour market and the need to focus on securing higher pay for the “working poor”. The report urged the Government to address this by looking again at the remit of the Low Pay Commission to enable raising of the minimum wage and urged employers to “step up to the plate” by providing higher minimum levels of pay and better career prospects, enabled by better skills. Interestingly, the Government has recently asked the Low Pay Commission to consider what conditions would need to be in place to allow a faster increase in the NMW without an adverse impact on jobs.
Whilst employers are, understandably, concerned about the potential increase in labour costs, knock-on effects on internal pay relativities and detrimental impact on business recovery, some commentators have questioned how realistic these fears are, pointing out that similar fears about the NMW were not realised when this was introduced. In addition, as HR and Reward professionals will recognise, “pay” is not necessarily the only element of an employee’s remuneration package and there are other initiatives which can, and have been adopted by many employers, and which should be taken into account. These can boost income levels, for example, staff benefits which provide access to discounted prices on a range of goods and services, economies achieved through collective purchases, efficient use of salary sacrifice arrangements, the ability to “flex” the remuneration package to suit individual/personal circumstances, and the provision of financial education and awareness raising to help households in managing their money.
Of course, for many employees working in low-pay/low-skills occupations such benefits may not be available to them, with a basic hourly/weekly wage rate providing the sole component of their “reward package”.
Whatever your stance on the concept of the Living Wage, it is clear that this is an issue which is likely to draw increasing attention and one which HR and Reward professionals will need to have firmly on their agenda.
Living Wage Week, which this year takes place from 3 to 9 November, will undoubtedly provoke further discussion and debate. In addition, it is one of the topics which will be considered at the CIPD’s forthcoming Reward Forum workshop event on the morning of 28 November, Reward Trends, Challenges and Opportunities.
Can you afford not to be there?!
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The living wage is a moral imperative, particularly in the public sector.
Why aren't the CIPD and HR professionals getting whole-heartedly behind the living wage movement? Surely it is at the heart of what we believe about people mangement: that investing in people, their skills and their pay, enables them to fulfil their potential and add greater value to themselves and their employer. We need to rediscover skills and competency-based pay so that any pay increases costs are more than matched by the benefits resulting from increased competence and productivity
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