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Do You Pay your Employees Enough to Live on?


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Written by:

Victoria Winckler
The Bevan Foundation




Amid the turmoil of tax cuts and the falling pound, an important announcement slipped under the radar recently. That announcement was of the new real Living Wage – set at £10.90. For someone working 37 hours a week, the real Living Wage means a gross annual salary of £20,971.60.  And while the uplift may be at a record level, so too is inflation the highest for decades.

The real Living Wage should not be confused with the statutory minimum wage. Unlike the legal minimum, the real Living Wage is a voluntary rate that employers choose to pay their employees.  It is designed to provide enough for a basic but acceptable standard of living, as well as being affordable for employers.

Already there are 471 employers in Wales who are accredited as Living Wage employers, covering employers of all sizes, in all sectors and in all places. From Nationwide to Nestle to charities and public bodies, these employers have seen the benefits of choosing to pay their employees a bit extra.

The business benefits of being a Living Wage employer can be significant. A major study by Cardiff University found that 86% of employers said it improved their reputation – after all, who wants to be the employer whose workers end a shift by going to the food bank? In addition, more than threequarters of large employers in the study – 76% – said that the real Living Wage helped to motivate and retain staff. With recruitment being one of the big business challenges at the moment, better retention is a very good reason to consider becoming a Living Wage employer even if the other arguments don’t persuade you. In other words, paying the real Living Wage is not just morally right but makes good business sense.

A decent wage for employees has never been more urgent. The Office for National Statistics estimates that in 2021 more than one in six employees in Wales was paid less than the real Living Wage rate in that year. That’s 223,000 employers who are (we hope) paid the statutory minimum but whose employers do not go the extra step of paying enough to live on.

An increase in pay not only means that employees can afford the basics, they also say that they feel valued by being paid the real Living Wage, can put money by and spend more time with their families. Employers who are serious about employee well-being who are not yet real Living Wage employers would do well to look at wage rates alongside their other well-being actions.

Some argue that the real Living Wage does not go far enough. They point out that the uplift in wages is small in cash terms and can be offset tax, national insurance and the loss of in-work social security benefits, which mostly taper quite steeply as earnings rise. They also point to the potential loss of employee benefits such as paid breaks when the real Living Wage is introduced. But while the real Living Wage is not the answer to fair pay and conditions, it is a very important step on the way.

Living Wage week, an annual celebration of the benefits of paying the real Living Wage for employers and employees alike, this year takes place in week beginning 14th November. There are events across Wales where businesses considering becoming a Living Wage employer can find out more.

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