Celebrating a sustainable rise in the Living Wage

By Roger Green, founder and Chair of Spotless Commercial Cleaning

Yesterday, the UK Government confirmed the National Living Wage (NLW) will rise to £12.21 per hour from next April for over 21-year-olds.

This latest boost marks a 6.7 per cent increase from the current NLW level of £11.44 per hour and will help address some of the impact of high inflation on wages seen over the past couple of years.

The NLW was introduced in 2016 as an obligatory minimum wage payable to UK workers aged 21 and over. While it is questionable whether business could regularly sustain a significant rise such as the 6.7 per cent uplift coming into effect next year, I believe the principle behind the NLW is one that should be supported by employers like myself.

These latest changes will coincide with an increase in the UK’s real Living Wage, a benchmark for employers who choose to pay their staff a rate that meets the basic cost of living in the UK. The newly announced level for the real Living Wage now sits at £12.60/hour outside of London and £13.85 within the UK capital.

If we believe in a fair society where people in lower paid professions earn wages that enable them to plan for their future, it is vital that we set viable standards like the NLW and the real Living Wage to help make this possible.

Looking back to my student days in the mid-80s when I was paid an hourly wage of £1.20 as a part time cleaner in an Edinburgh bank, makes me appreciate the progress we’ve made on this front. At that time, there were minimal employment rights, no entitlement to holiday pay, and health and safety was barely mentioned.

The introduction of the £3.60/hour National Minimum Wage in 1999 proved transformational and had a positive impact despite some initial resistance from business. Rather than forcing lower paid workers out of their jobs, it gave them greater protection and helped enhance the pride they felt towards their work. As the UK and other nations have found, paying workers a fair minimum wage can have a positive impact on productivity while also improving employee motivation and reducing the level of staff turnover.

While some companies (including Spotless), which paid workers above-market wages, have not been overtly affected by the National Minimum Wage, it’s important to recognise it can impact more volatile sectors. This has, in some cases, led to other cost reduction techniques such as the introduction of zero-hour contracts and the exploitation of younger staff who are on a lower minimum wage level.

It must be noted, however, that most businesses want their employees to be happy, secure, and committed and they are in favour of paying them more to help achieve this provided that wage increases are sustainable.

Research by the Learning and Work Institute and Carnegie UK Trust from 2020 showed a majority of employers supporting further increases to the NLW. Their survey of more than 1,000 UK businesses showed that over half (54 per cent) supported an increase in the NLW, with fewer than one in 10 (9 per cent) opposing this move. The research also highlighted that businesses needed more support from government in helping them adapt to a higher wage floor.

While supporting the rise in the NLW, it is essential that the UK Government strikes right balance between pay and affordability going forward. Future increases need to be sensitive what employers, especially small businesses, can realistically afford.

It’s also important to consider the pay gap between more junior staff and those in lower management positions to ensure the latter group are not unduly squeezed in their pay levels and potentially disincentivised from taking on positions of greater responsibility.

Ongoing dialogue between the UK government and the business community will be key in ensuring fair pay is set at a sustainable level. We should, however, celebrate the NLW as a positive step forward which can benefit workers, society and business.