Living wage employers lead the way
With Inflation at its highest levels in four decades and fast-approaching double figures, paying staff a real Living Wage based on the cost of living has never been more important.
By paying a fair and liveable wage, you can help your workforce meet a decent standard of living
Increasingly, responsible organisations recognise that an employee’s wage needs to meet the real cost of living. A fair and liveable wage gives employees a chance to lead a dignified life, with access to the opportunities and choices needed to fully participate in society. And, with over 10,000 employers now Living Wage-accredited, many are embracing the business benefits too. In response to the cost-of-living crisis, the Living Wage Foundation has committed to bringing forward the announcement of its new rates to September 2022 – two months ahead of schedule.
There are three types of pay fairness:
People professionals play an important role in formally defining what ‘fair’ means in the context of their particular organisation. This, in turn, helps guide management decisions on reward (such as how much to contribute to employee pensions) and shows employees what they can expect from the organisation.
See the CIPD’s factsheet on pay fairness and pay reporting for more information on:
A liveable wage is one that enables people to lead a dignified life and meet the true cost of living.
It is worth saying that a low wage won’t necessarily mean someone is in poverty, and a decent wage won’t always protect them from poverty. A person on low pay might be able to keep their living costs low if they live with a higher earner, while someone who earns a decent hourly wage could still face poverty if they have particularly high living costs or find themselves stuck on a work contract that doesn’t suit their needs, with too few hours of work to reach an acceptable standard of living, and little chance of progression.
According to research by the Centre for Research in Social Policy at Loughborough University, a full time job on the National Living Wage in 2021 did not guarantee you the minimum acceptable standard of living that we as a society consider everyone in the UK should be able to achieve. A single person needed to earn £20,400 a year to reach this standard, but the National Living Wage paid just £17,400. A couple with two children could only achieve this standard if they both worked full time, which is simply not feasible for many families due to barriers such as a lack of affordable childcare.
With high inflation predicted to last beyond 2022, the recent 6.6% National Living Wage increase won’t be enough to protect working people from poverty as the cost of living continues to rise. It’s therefore more important than ever that employers seek to understand and alleviate the financial strain their workforces are under.
With Inflation at its highest levels in four decades and fast-approaching double figures, paying staff a real Living Wage based on the cost of living has never been more important.
UK households are in the midst of an enormous-cost-of living challenge. Inflation rates are at their highest in decades, and individuals and business are all feeling the impact of soaring energy, food, housing, and transport costs. But those on the lowest incomes will be hit the hardest. According to the Joseph Rowntree Foundation, low-income families are living through a ‘frightening year of financial fear’, with many falling behind on bills, going without essentials, or taking on high-interest debt.
The National Living Wage already failed to protect many households from poverty before the crisis emerged, so the 6.6% increase in April 2022 hasn’t been enough to offset the rising cost of living. According to The Institute for Fiscal Studies, workers who earnt £30,000 in April 2021 needed to see their wages grow by more than 7% to maintain the same standard of living a year later.
Overall inflation is predicted to hit 14% in October 2022, although the poorest households may face an even greater increase (14%), as they spend a higher proportion of their budget on gas and electricity. Organisations who are under pressure from their own rising costs, will be hard-pressed to help their lowest-paid employees. But, there are other ways to help.
Employers should make an extra effort to understand people’s needs and circumstances, treat them with dignity and respect, identify ways to support their financial wellbeing, and help to break down any barriers preventing them from securing a liveable income.
'Crucially', says Charles Cotton, Senior CIPD Policy Adviser, Performance and Reward, 'employers need to normalise conversations about money so people don’t feel embarrassed seeking help. The earlier they can act, the less likely money problems will impact their mental wellbeing and productivity.'
According to the CIPD Good Work Index 2022, organisations should also focus on skills development for lower-paid workers to improve their career progression and earning potential.
Calculate the minimum income needed for different family types with the minimum income calculator:
Even if you pay at or above the real Living Wage, members of your workforce may struggle to earn a liveable income if they’re not able to work enough hours – in other words, if they’re underemployed. In some cases, employers simply may not be able to offer any more hours. But in other cases, some relatively simple measures could help ensure that those who want or need to work more hours can do so:
The voluntary real Living Wage is an hourly rate calculated according to the basic cost of living in the UK. It’s higher than the Government’s compulsory National Living Wage, which is based on a percentage of medium earnings. The real Living Wage is set independently by the Living Wage Foundation, and around 9,000 employers in the UK have voluntarily signed up as accredited Living Wage employers. CIPD research suggests that even more employers pay the voluntary rate, even if they’re not accredited: 74% of employers pay, or plan to pay, at or above the real Living Wage.
Paying the real Living Wage is not only good for your employees’ financial wellbeing; it’s good for business too. According to the Living Wage Foundation, 86% of accredited employers said it had improved the reputation of their business, while 75% said it increased motivation and retention rates.
Due to the cost-of-living crisis, the Living Wage Foundation has decided to bring the announcement of their 2022-23 Living Wage rates forward to late September 2022.
Paying the real Living Wage is not only good for your employees’ financial wellbeing; it’s good for business too
Helping your people to escape poverty needn’t cost a penny
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