Paying the Real Living Wage - A Social Opportunity
With the ever-increasing regulations, societal awareness, and growing stakeholder expectations on the E of ESG, the S, social, can be more challenging for companies to find time to focus on, unpick, and demonstrate commitment and progress.
Considering the importance of people (employees, customers, and wider communities) in enabling the success of small-cap companies, it's an area that many firms want to shift their ESG focus to but are unsure how to go about it.
One option is to pay staff the real Living Wage, and to become an accredited Living Wage Employer.
Although this would come at some cost to most firms, there is a clear business case, and this is a relatively simple action to take. Yet, our data shows that fewer than 1% of all AIM firms disclose that they pay the real Living Wage to employees, and only half of those are accredited or considering accreditation.
So, what is the real Living Wage, what are the benefits, and what is required to get accredited?
What is the real Living Wage?
The real Living Wage differs from the minimum wage and the national living wage. The below sets out the UK current position:
Minimum Wage: The legal minimum pay set by government, £10.18 per hour, and applicable to any workers between 21 and 23 years old. There is no London weighting.
National Living Wage: The legal minimum set by government, £10.42 per hour, and applicable to any workers over 23 years old. There is no London weighting.
Real Living Wage: A voluntary rate, set by third party based on the actual cost of living. Applicable to workers over 18. There is a London weighting. At the end of October 2023, the UK real Living Wage rose to £12 in UK and £13.15 in London.
What are the benefits?
The main benefit is that you can be sure your employees are at least paid enough money to live. With the current cost of living crisis, increasing the salary of the lowest paid workers to at least the real Living Wage will have huge benefits across an organisation.
Paying the real Living Wage can reduce costs, improve reputation and be a competitive advantage, including:
Increase staff productivity and moral, reducing external stresses of the cost of living
Increases retention, reduces the cost of hiring
Attracts talent from competitors and across the market
Improves reputation externally and proves commitment to staff
A social accreditation and commitment, supporting ESG strategies
What is required to get accredited?
Accreditations are achieved at the country level, although not all countries have real Living Wage accreditors. In the UK, the main accreditor is the Living Wage Foundation and they have a list of global partners on their website.
To become a Living Wage Employer, you need to:
Pay all staff the real Living Wage. This excludes deferred pay (e.g. pension contributions) and non-guaranteed pay (e.g. bonuses)
Pay all regular contractors the real Living Wage. Where regular is defined as working at least 2 hours a week (e.g. office cleaners) or 8+ consecutive weeks a year. It is possible to obtain accreditation with a plan in place to extend the pay to contractors, which may required contract renegotiation, for example.
Implement pay increases within 6 months of the real Living Wage being increased.
Apply to the Living Wage Foundation. There is a small, sliding scale fee.
The Living Wage Foundation also have Living Pension and Living Hours accreditations which may be of interest to some firms.
To understand more, please get in touch with the team.
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