The Living Wage is good for employees and good for business

Speaking at an event to celebrate Living Wage Week, hosted by Stanley-based Hodgson Sayers Ltd, the national chairman of the institute of Directors (IoD) said that a large number of members are set to award pay rises to staff.

At the event, to celebrate Hodgson Sayers accreditation as a Living Wage employer, Ian Dormer said that over 70% of IoD members already pay their staff the living wage and that a recent survey confirmed that two thirds said they planned to raise staff pay either in line with, or above inflation, in the coming months.

The national Minimum Wage rate is currently set at £6.50, while the Living Wage is set at £7.85 for the UK and £9.15 for London.

It is set independently (in London by the Greater London Authority), updated annually, and calculated according to the basic cost of living using the Minimum Income Standard for the UK. Decisions about what to include in this standard are set by the public, creating a social consensus of what people need to make ends meet.

Mr Dormer, who is managing director of Birtley-based Rosh Engineering, said: “While we all live and work in a very competitive world where all costs have to be monitored and controlled, if staff feel exploited or undervalued then we have more of a problem than cost.

“Managing cost is only the first stage of running a successful business. Improved productivity can far outweigh any cost savings achieved in a business. I believe that a simpler way is to appreciate your staff. Value the contribution and acknowledge what they deliver.

“It is, indeed, great news that so many employers have signalled that they intend to implement pay increases, the crucial thing here is that they said they are only able to do so because of an increase in their corporate performance. Good corporate performance so often comes from service that is better than the competition and a positive and empowered workforce. So, I congratulate Hodgson Sayers for becoming a Living Wage employer and I would like to see many other firms follow in their footsteps.”

Mike Wade, Finance Manager at Hodgson Sayers, said: “Hodgson Sayers accreditation as the first Living Wage employer in the construction industry in the North East is recognition of the values which we place on our employees. We seek to be the employer of choice, and in order to recruit and retain exceptional employees we need to treat them decently.

“A significant part of this is to reward them properly and enable them to concentrate on the quality of work they do, rather than be distracted by money problems. Let’s be clear about the numbers. An employee over 21 working 39 hours per week at the National Minimum Wage will have net pay of £228. The same employee paid the new Living Wage rate would take home £263, an increase of £35 per week or £1,820 per year in take home pay!

“The moral case is clear, but what of the financial case? In the macro-economic model a money multiplier exists which increases the value of each pound extra placed in the pocket of the consumer, dependant on their marginal propensity to consume. In plain English, if an employee takes home an extra £35 per week, particularly at the Living Wage income levels, it is likely this will be spent and equally likely that this will be spent in the local area. If £30 of that weekly increase were spent in the local economy, the decision to pay the Living Wage could generate an additional £59 for the local economy!

“Studies around the cost of recruitment put the cost at between 13% and 22% of wage costs. When this is added to the costs of post recruitment training then the savings can offset the incremental costs. Add to this the motivational impact of the increased level of pay, the better quality of employee attracted by that level of pay, and the easing of recruitment as a consequence of potential employee perception and the investment in terms of costs can be seen to be minimal. All of this is not taking into consideration the enhanced perception of your business by client and supply partners.”

Sarah Vero, Partnerships Manager, Living Wage Foundation said: “As the recovery continues it’s vital that the proceeds of growth are properly shared. It’s not enough to simply hope for the best. It will take concerted action by employers, government and civil society to raise the wages of the 5 million workers who earn less than the Living Wage.

“The good news is that the number of accredited Living Wage employers has more than doubled this year — over 1,000 employers across the UK have signed up. In the last 12 months the number of Living Wage employers in the FSTE 100 has risen from four to 18 including Canary Wharf Group and Standard Life.

“Those businesses that can should follow the example of Nestle and Nationwide, as well as hundreds of smaller, independent businesses like Hodgson Sayers Ltd, who pay the Living Wage.”