This month, the Living Wage Foundation announced that over 2,000 employers have signed up to pay the Living Wage.\u00a0 That sounds good but does that bode well for employees and employers \u2013 have the hidden costs been glossed over?<\/p>\n
Individuals should be paid a fair wage for their skills\/effort provided they maintain such skillls, are flexible and work in the interests of their employer.\u00a0\u00a0 The living wage is currently a minimum of \u00a39.40 per hour in London and \u00a38.25 for the rest of the country.<\/p>\n
Employers who sign up to the living wage code may have several reasons such as:<\/p>\n
- \n
- the need to recruit and retain versatile staff;<\/li>\n
- to pay staff a reasonable wage\/salary;<\/li>\n
- to be seen as a progressive employer;<\/li>\n
- to give prestige to their organisation.<\/li>\n<\/ul>\n
Ripple Effect and Cost Spiral<\/strong> <\/span><\/p>\n
Large employers and others in market niches will probably be able to offset the increased wage bill by price or cost adjustments.\u00a0\u00a0 Other employers may experience pressures in recruiting and retaining staff but may not be in a position to afford the Living Wage rates.\u00a0 They will have to afford the national adult mimimum wage at \u00a36.70 per hour and, from April 2016, the new minimum wage of \u00a37.20 per hour.for those over age 25.\u00a0 A cost spiral is likely to arise which will not just affect employers \u2013 employees may also find their increase in net pay to be less than they expected.<\/p>\n
Employees May Lose Out<\/strong> <\/span><\/p>\n
Employees are likely to find their rise is soon eroded by:<\/p>\n
- \n
- increases in the price of basics such as food;<\/li>\n
- tighter control of available hours of employment;<\/li>\n
- higher deductions from pay.<\/li>\n<\/ul>\n
Some employees will find that their deductions increase because they have crossed the threshold for being auto enrolled into a pension scheme.\u00a0 In 2017, the rate of contributions for employees will increase from 1% to 3% [see update note at end].\u00a0 A pension is an important benefit and we urge employers to persuade employees to stay in the pension scheme and not opt out.\u00a0 Managers can help to shape the expectations of employees by forewarning them of the likely effect on their gross and net pay so that they are not taken by surprise by a smaller net increase in their pay.<\/p>\n
Pressure on Employers and Alternative Options<\/strong> <\/span><\/p>\n
Employers may encounter difficulties in retaining and recruiting staff.and creeping resentment as employees see media reports and some friends receiving more pay.\u00a0 Even so, the question of affordability may be a barrier to many.\u00a0 Are there other options employers can explore?\u00a0\u00a0 Some options are summarised below.<\/p>\n
Market Supplements<\/strong><\/p>\n
If the pressure centres on certain skill groups, then one answer may be to introduce market supplements for key individuals or teams.\u00a0\u00a0 A market premium is an addition to pay that may be increased, reduced or stopped to match changing labour market conditions. \u00a0\u00a0 If composed appropriately, the premium can be terminated or amended without affecting the main employment terms. See an earlier article about market supplements.<\/a><\/p>\n
Academy Schools may also wish to consider the use of market supplements for teaching staff.\u00a0 Head Teachers and Governors can read more about such supplements and other reward and recognition ideas in the following school focused article. (sorry the link needs to be revised)<\/p>\n
Focused Bonus\/Profit Share<\/strong><\/p>\n
If the wage\/salary pressure affects most of the organisation, you may not be confident to increase rates generally but you could make lump sum rewards to employees based on reaching \u2018performance\u2019 milestones or spread those across future months.\u00a0 A simple but focused bonus scheme or quasi profit share scheme could be used.\u00a0\u00a0 No special concessions for income tax are involved so the milestones can be kept simple but realistic to achieve and to understand.\u00a0 You can read\u00a0 more about those and other ideas in the following article \u2013 Productive Productivity.<\/a><\/p>\n
Update to this Article<\/em> Dec 2015 \u2013<\/em> since writing this article, the Chancellor has announced that the increase in contributions for auto enrolment pensions will be deferred from October 2017 to April 2018 \u2013 fuller details of the implications can be seen in the following article \u2013 Temporary Respite in Costs of Auto-Enrolment Pension Schemes.<\/a><\/p>\n
If you would like help on reviewing organisational and\/or pay structures or writing appropriate terms of employment as above, please feel free to contact the author via this route.<\/a><\/p>\n
\u00a9 2015 HR Management Dimensions Ltd.<\/span><\/strong><\/p>\n
Related blogs and websites<\/strong><\/em><\/p>\n
Web site:<\/a> HR Management Dimensions<\/a>
\nHR Management Dimensions blog <\/a>\u2013 general observations on hr management issues<\/p>\n<\/p>\n
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This month, the Living Wage Foundation announced that over 2,000 employers have signed up to pay the Living Wage.\u00a0 That sounds good but does that bode well for employees and employers \u2013 have the hidden costs been glossed over? Individuals should be paid a fair wage for their skills\/effort provided they maintain such skillls, are […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"wds_primary_category":0,"footnotes":""},"categories":[77,18,22],"tags":[78,79,80,81,82,83,84],"class_list":["post-766","post","type-post","status-publish","format-standard","hentry","category-employee-benefits","category-employee-engagement","category-reward-recognition","tag-academy-schools-market-rates-of-pay","tag-auto-enrolment-cost-increases","tag-fallout-effects-from-the-living-wage","tag-living-wage-hidden-costs","tag-market-supplements","tag-national-minimum-wage-implications","tag-shaping-employee-expectations"],"jetpack_featured_media_url":"","post_mailing_queue_ids":[],"_links":{"self":[{"href":"https:\/\/hr-management-dimensions.co.uk\/HRMDmn\/wp-json\/wp\/v2\/posts\/766","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/hr-management-dimensions.co.uk\/HRMDmn\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/hr-management-dimensions.co.uk\/HRMDmn\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/hr-management-dimensions.co.uk\/HRMDmn\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/hr-management-dimensions.co.uk\/HRMDmn\/wp-json\/wp\/v2\/comments?post=766"}],"version-history":[{"count":0,"href":"https:\/\/hr-management-dimensions.co.uk\/HRMDmn\/wp-json\/wp\/v2\/posts\/766\/revisions"}],"wp:attachment":[{"href":"https:\/\/hr-management-dimensions.co.uk\/HRMDmn\/wp-json\/wp\/v2\/media?parent=766"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/hr-management-dimensions.co.uk\/HRMDmn\/wp-json\/wp\/v2\/categories?post=766"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/hr-management-dimensions.co.uk\/HRMDmn\/wp-json\/wp\/v2\/tags?post=766"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}