“Every cap on training or pay and benefits costs is just as likely to destroy, as create, value.”
Last month I wrote about Professor Jules Goddard’s award-winning research calling for “bolder investments and higher costs” to provide a sustainable basis for our economic recovery. But, particularly in low-paying and labour-intensive industries, how can you possibly increase your pay and benefits costs and stay in business?
Two reports out last month help to provide some answers. The Social Market Foundation’s (SMF) Making Progress: Boosting the Skills and Wage Prospects of the Low Paid highlights the strong association between productivity, pay and skills, with the UK languishing down the Organisation for Economic Co-operation and Development’s (OECD) league tables on both the latter dimensions.
Half of the three million UK workers in low-paid jobs have no qualifications or only a few GCSEs, while more than half a million have insufficient skills even to carry out their current role. Yet those in low-paid work are least likely to be offered training by their employer and the least able to take it up when it is offered.
Career prospects are the number one driver of employee engagement in the UK and training is the clearest route to career and pay progression, with the SMF estimating that a level one qualification adds 10% to an employee’s earnings and “would make these individuals more valuable to UK firms and the UK economy”.
So certain is the SMF of these benefits that it proposes the government should provide a subsidy of up to £2,000 a head for organisations to train their low-paid workers, saving the Treasury £800 per person per annum in higher tax receipts and lower benefit payments, and adding £500 to the pay of a single person on the national minimum wage.
Benefits of training
But why don’t employers themselves see the benefits of training and enhanced rewards without the subsidy? Jobs economist John Philpott’s Rewarding Work for Low-Paid Workers, written for the Joseph Rowntree Foundation, looks at this question. With an expert summation of the research, Philpott concludes that HR, reward and development practices “offer a financial return to employers through higher productivity, improved performance, reduced labour turnover costs and lower absenteeism” as well as “boosting job satisfaction and employee wellbeing”.
But he warns this is no magic bullet and “the business case is not universal”. The realisation of these benefits depends on factors such as the availability of cheap labour, customers’ willingness to pay consequent higher prices, genuine employee involvement and, most critically, the effective application of these HR practices, for example providing training in appropriate and transferable skills, and operating pay structures that reward skills acquisition and higher performance.
In other words, reward and benefits professionals, it is all down to us to be courageous enough to make the case and skilled enough to deliver the potential benefits into practice.