Today’s news presents an increase to the Real Living Wage, up by 20p per hour in the capital and 30p per hour outside of London.
The HR Place considers what this means for small businesses, and what changes need to be made.
Do I have to increase my employees’ hourly rates now?
Legally, no. You do of course have to pay National Minimum Wage. As of April 2019 this is as follows:
Aged 25+ £8.21
Age 21-24 £7.70
Aged 18-20 £6.15
Aged under 18 £4.35
Apprentice rate £3.90 (if under 19 or in the first year of their apprenticeship).
Unlike the government’s National Minimum Wage (confusingly, sometimes referred to as National Living Wage!), the Real Living Wage is voluntary. Calculated by the Living Wage Foundation charity, the Real Living Wage is considered to be the rate that people need to earn in order to live in the UK.
Why pay more than I have to by law?
Employers can choose to become ‘living wage-accredited’, paying all their workers at least the real living wage. So far, around 6000 employers have signed up, including over 30 per cent of Companies in the FTSE 100. Employers have 6 months to apply the change, although are encouraged to do so with immediate effect.
Whilst it’s not a legal requirement, with this level of uptake you may find yourself falling behind the competition if paying £8.21 per hour in line with National Minimum Wage rate for over 25s, compared with the Real Living Wage of £9.30 per hour (£10.75 in London). There’s also the ethical element, freeing people from the struggle of low pay and improving your employees’ wellbeing.
What other business benefits are there to increasing hourly rates to the Real Living Wage?
According to the Living Wage Foundation, employers have seen a range of benefits to paying the living wage, including improved employer reputation, more motivated staff, reduced staff turnover, differentiation between themselves as an employer versus other businesses who do not pay the higher rate, and an improvement in relations between employees and managers.
When recruiting, as well as ensuring you are meeting your obligations under National Minimum Wage, employers should always carry out an analysis of market trends within their sector, to ensure salaries or hourly rates are competitive. While comparing yourself with competitors, you can also factor in the employment benefits that you offer, including annual leave (especially if this is enhanced above the statutory amount), staff discounts, healthcare provision or support with qualifications and training.
In the same way that National Minimum Wage provides the bare legal minimum, National Living Wage will be seen by employees as a sign of an employer’s commitment to the ethics of supporting their staff with a wage that supports living conditions.
This of course is all dependent on whether it is affordable for your business (to put things simply, there’s nothing ethical about applying wage increases all round and then having to make redundancies).