Action needed on living wage

Low pay came under the spotlight last month when the Social Mobility and Child Poverty Commission called on the government to develop a low-wage strategy to raise the bottom rungs of the UK’s pay ladder.

In its report, Social Mobility: The Next Steps, the government-appointed commission made a number of recommendations, including that the government should encourage employers that can afford to pay the living wage to do so voluntarily and to pay the living wage more widely in the public sector.

Duncan Brown, principal at Aon Hewitt, said low pay issues presented an opportunity for employers to review their pay strategies. “It’s a great opportunity for compensation and benefits managers to look at how the return can be achieved on the cost [of increasing salaries],” he said.

“How you pay people in regard to skills development and growth is going to be key. Skills pay is something we should be hearing a lot more about, rather than just paying [people] extra.”

The living wage, which is calculated according to the basic cost of living in the UK, is currently set at £7.45 an hour outside London and £8.55 in the capital. This is higher than the adult national minimum wage of £6.19 an hour, which will rise to £6.31 on 1 October.

The number of people who earn below the living wage has risen 14% from 3.4 million in 2009 to 4.8 million in 2013, according to the Low Pay Britain 2013 report by the Resolution Foundation.

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The report also found that 77% of employees aged under 20 earned less than the living wage. Pay below this level is most common in the hotels and restaurant sector, where 67% of staff receive less than the living wage.

One organisation that has taken steps to pay staff a living wage is the Unity Trust Bank, which achieved employer accreditation from the Living Wage Foundation in September.