With median pay still lower than it was in 2008, employers who pay the voluntary Living Wage have reported a range of business benefits, from enhanced reputations and labour relations to improved commitment and motivation.

The situation

Average UK employee earnings have not grown as fast as prices for most of the decade since the 2008 financial crisis. In real terms, median pay is below what it was in 2008.

Employee financial well-being has suffered as a result. Poor employee well-being can affect workplace productivity and worries about money has been shown to impact on employees’ ability to do their job.

CIPD viewpoint

One way of improving employee financial well-being is by paying a liveable wage. CIPD research on job quality shows a link between pay levels and whether people believe they are being rewarded appropriately in terms of responsibilities and achievements. Those that are paid below the voluntary Living Wage are more likely to think that they are not paid reasonably compared with than those who receive more than this amount.

In addition, employers that pay the voluntary Living Wage report such business benefits as enhanced reputation, easier recruitment, better labour relations, and improved commitment and motivation.

While ensuring that pay outcomes and processes are fair is an important step, employers can boost financial well-being further by offering employees a comprehensive range of employee benefits and access to financial information and guidance. By doing so, this can help employees feel more in control of their finances and be more engaged with work.

Actions for Government

  • Improve awareness of existing pay rights among employees by running a high-profile ‘know your rights’ campaign.

  • Raise awareness among employers of all sizes and especially SMEs, about what their employment duties are, including their obligations concerning pay. This would entail working with relevant stakeholder organisations.

  • Explore how living costs can be reduced so that wages go further, especially those associated with housing, travel, energy and care.

  • Increase the tax-free personal allowance.

  • Embed financial literacy in schools, further education, higher education and apprenticeships.

  • Work with employers and the financial services industry to improve financial awareness among employees.

Recommendations for employers

  • Pay a wage to workers that is liveable and investigate becoming an accredited Living Wage employer.

  • HR should make the case for creating a workplace employee financial well-being strategy that supports and is supported by the overall health and well-being strategy.

  • Explore how low-waged workers can progress in their careers and earning potential, such as through learning and development opportunities.

  • Help stretch employees’ earnings by providing staff benefits, either directly or through a voluntary benefits scheme.

  • Explore which benefits suit the needs of the workforce and investigate whether these can be offered flexibly so that individuals can select those that best suit their circumstances.

  • Run employee financial education and benefit communication programmes so employees are aware of the options open to them and how to get the most from their decisions.

CIPD resources and references

External resources and references

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