Louise’s lowdown: The pull, pinch, and push power of pay rates

Louise Fordham

In August 2017, the Living Wage Foundation and National Union of Students released the results of the Student opinion survey: June 2017, which found that 93% of students are motivated to work for an organisation that pays the voluntary living wage.

The Living Wage Foundation’s living wage rate is paid by employers on a voluntary basis. It is currently set at £8.45 across the UK, and £9.75 in London. The rate is designed to reflect the real cost of living and applies to staff aged 18 and over. It should not be confused with the government’s national living wage rate, which is mandatory for staff aged 25 and over. This stands at £7.50 an hour.

The survey also found that 79% of student respondents would think badly of their employer if it paid any of its staff below the voluntary living wage, and 84% feel that organisations should pay all employees enough to live on. Meanwhile, almost two-thirds (64%) of respondents look for evidence of ethical practices in a future employer.

The figures are unlikely to be a surprise to many. Firstly, there has been a growing awareness that employees are looking to work for an employer with strong ethical values. As I mentioned in my column last month, 51% of US employee respondents will not work for an employer that does not have strong social and environmental commitments, according to the 2016 Cone Communications employee engagement study, published by Cone Communications in June 2016.

Secondly, pay that is in line with the cost of living becomes increasingly important as the squeeze on household incomes tightens. Real household disposable income per head for January-March 2017 dropped by 2% compared to the same period a year ago, according to the latest Office for National Statistics’ (ONS) Economic wellbeing statistical bulletin, published in July 2017. This represents the biggest decline since the end of 2011. The ONS’ UK labour market report: August 2017, published in August 2017, found that while both total and regular pay in nominal terms increased by 2.1% between April 2016-June 2016 and April 2017-June 2017, total and regular pay fell by 0.5% in real terms, which is adjusted for consumer price inflation.

In addition to paying a decent wage, some employers are helping to make their employees’ pay go further through benefit programmes. Voluntary benefits, for example, provide access to discounts on a range of everyday items, while bikes-for-work schemes and season ticket loans enable staff to spread the cost of bigger ticket items over several months. Other organisations offer support with housing costs through rental deposit loan schemes, mortgage benefits, and home-moving salary advance schemes. Financial education and wellbeing programmes can also help staff to better manage their money, save for the long term, and potentially reduce the impact on their wider wellbeing that financial stress can cause.

While the voluntary living wage might factor into future graduates’ decision-making process when seeking work, it is compliance with statutory minimum wage rates that is on the government’s agenda this month. On 16 August, the Department for Business, Energy and Industrial Strategy (BEIS) published its latest list of employers that failed to correctly pay the national living wage and national minimum wage. Argos topped the list for its failure to pay £1.46 million to over 12,000 employees.

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The 233 organisations on the list are required to back pay staff for the underpayments, and the government has also imposed fines totalling a record £1.9 million. Pay rates are not only an attraction and retention issue then, they can also pose a reputational and financial risk.

The most common reasons for non-compliance among the employers on the government’s list include pay deductions for uniforms, failure to account for overtime, and incorrectly paying apprentice rates to staff. Readers can find out more about minimum wage compliance in Crowley Woodford: National minimum wage traps for the unwary employer.