Living Wage - linking salaries to the true cost of living

24th of September 2013
Living Wage - linking salaries to the true cost of living
Living Wage - linking salaries to the true cost of living

The minimum wage was made law across much of Europe to lift low-paid workers out of poverty. Critics say the rates set |nationally are too low to have a real impact. Hartley Milner reports on a campaign to provide people with a pay packet they can live on.
‘Get a life’ we are told when we plunge ourselves into our work to the exclusion of everything else that gives our days meaning. This is easier said than done, as finding the right work-life balance can be a challenge, especially if you are struggling to get by on a poverty wage.

Most of us work for a living, but the lowest paid find themselves living just to work, up with the lark and the owl to provide their family with the very basics of life. No time for recreation or a proper family life if you need to hold down several jobs.

The national minimum wage (NMW) is now implemented in three-quarters of EU states, each setting their own rate reviewed annually. The remaining countries have minimum pay rates agreed through collective bargaining in their various employment sectors.

The EU had suggested member states set a minimum pay rate of at least 60 per cent of their average national wage. The levels actually set vary wildly across the region and average out at 45 per cent – well short of what is considered enough for people to subsist on without additional state support.

Now, though, the idea of a wage linked to the true cost of living is being talked up in many European countries. The living wage is voluntary for employers, not a legally enforceable minimum level of pay governments believe the market will bear. And campaigners already have a foot wedged firmly in the door of one EU state.

The UK has had the living wage since 2001. The rates are set independently and updated annually to arrive at a figure people need to afford life’s essentials with a little left over to put aside for the future. They are currently £8.55 (9.92 euros) an hour in London and £7.45 (8.70 euros) elsewhere and compare with the national minimum wage of £6.19 (7.20 euros). Moving a full-time worker from the NMW to the ‘living’ rate typically costs £2,500 (2,904 euros) a year.

In the early years, the take-up was sluggish, especially in the private sector, with an estimated 45,000 out of a total of nearly five million low-paid workers benefiting. But the campaign is now gathering pace, according to the Living Wage Foundation, an independent accreditation initiative that works with UK employers to implement the scheme. To date, 270 employers have signed up.

“Where we are doing really well is in the ‘third sector’ (not-for-profit organisations) and the public sector, at the top and bottom end,” said the Foundation’s Caroline Reilly. “Where we are struggling is with the retail sector, but we envisage that here too we can raise awareness of the need for
the living wage and convince employers of the advantages.

“We find employers want to provide their people with a decent income, and while they may initially have reservations about implementing the living wage because of the cost factor, they discover the benefits can more than offset the cost in the long term. And being a voluntary scheme, they find it easier to accept.”

The Federation says:

• 80 per cent of employers report the living wage has enhanced the quality of their employees’ work

• Improved loyalty and customer service

• Reduced absenteeism by 25 per cent

• Improved retention rates and reduced HR costs

• 70 per cent say it has raised consumer awareness of their commitment to be an ethical employer

• 54 per cent of employees say they are more positive about their workplace and 52 per cent feel more loyal towards their employer

• 32 per cent report their home life has improved because they are free to spend more time with their family

• 38 per cent say they have greater spending power and able to save more.

Campaigners have had our industry in their sights from the start and claim a number of hits, but cleaning contractors face specific barriers to taking up the living wage.

Melissa Higgs of the British Cleaning Council (BCC) explained: “What we have is a procurement situation that is often biased towards price. While that is the case, contractors submitting bids quoting the living wage can be at a disadvantage due to the tight margins associated with cleaning. So rather than convincing the contractors to pay, it can be a case of putting the work in to convince clients of the benefits.

“When clients are aware of the advantages of paying the living wage, such as greater opportunities for training leading to an increasingly skilled workforce, greater staff commitment and lower staff turnover, we find they can be incredibly supportive of it. Many big employers such as government departments are happy to pay it and a lot of local authorities are now asking for two bids when inviting tenders – one not allowing for payment of the living wage and the other incorporating it. And they are overwhelmingly choosing the bid with the living wage, if they support it in principle.”

Could this lead to contractors reducing their employees’ cleaning hours to offset the extra cost?
“There are rare examples of this happening,” said Higgs. “The BCC encourages that the living wage is paid within a set-up of daytime cleaning, rather than your typical night fairies coming in to clean after everyone has gone. Daytime cleaning involves generally much longer hours for the cleaning operative, around 30 hours a week. And those hours are worked during the normal working day, so from a social and safety viewpoint that is much better, because staff are not travelling on buses late at night or in the early morning.”

Sandy Aird of Enhance Office Cleaning employs 120 people at 45 client sites in and around London. In 2010, he decided to pay his cleaners, daytime housekeepers and supervisors the living wage because “it simply seemed the right thing to do”.

Aird said: “We wanted to do this, but we had to be careful how we approached it. We couldn’t just tell our clients we are going to raise our wage costs and they will have to pay for it. They would have turned around and said ‘that’s fine, we’ll find another contractor’. We had to take a sensible commercial approach.

“First of all, we met all our clients face-to-face and told them that we had decided it was now company policy to pay the living wage. We explained why we were doing it and why allowing us to pay it would be beneficial for all sides. Going from an average rate for part-timers at that time of £6.50 (7.52 euros) an hour to £7.85 (9.11 euros) for most of our staff was quite an increase in costs to pass on. We presented our clients with possible efficiencies to mitigate the cost, including reducing the hours allowed for cleaning. We argued that even with a reduction in hours we should be able to maintain standards due to the increased motivation, productivity and stability of our staff.

“Overall, the additional cost to our clients was just four per cent on average. Some even agreed to pay extra without any reduction in cleaning hours and ended up spending 30 per cent more than they previously paid. Many had the attitude that they didn’t want anyone earning poverty wages working on their premises.

“All our clients came on board except for two who couldn’t make a decision. I think they agree the living wage is the right way to go in principle, but are not ready to bite the bullet just yet. We are still in discussion with them and hope they will eventually be persuaded. The problem for one of them is they are not paying the living wage to some of their own people, such as receptionists and admin staff, so how can they justify a contractor paying it?

“We have another client some of whose catering staff were not on the living wage. When they agreed to pay us the extra, they went to their catering contractor and said they would do the same for them. So the employees of another company benefited from the discussions we had with that client.”

And of the business benefits, Aird said: “Having people on better rates of pay has reduced staff turnover, making it easier for us to manage the business. Our clients have gained because our people are more motivated and more productive. But the main benefit is that our relationship with our clients is stronger than ever. They can see that we are an ethical employer and when it comes down to it the only people that really matter to them are the people working at their premises. How those people are managed and rewarded is really important to them.”


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