You are likely aware of the general idea – if not the detail – of the Living Wage. Under the scheme, employers agree to pay an hourly rate which reflects the cost of living in the UK, rather than the minimum level of pay as legislated by the government.

Born from a frustration of struggling to make ends-meet despite working hours far beyond a standard full-time role, Living Wage was established in 2001 by members of London Citizens. Whilst the issue is perhaps most keenly felt in London where the cost of living is substantially higher than elsewhere in the UK, it is an issue which has since been picked up by workers across the country.

Thousands of employers have now signed up to pay the Living Wage, a recognised sign of good practice in employment.

The detail of the Living Wage

The UK Living Wage is £8.25 an hour, and the London Living Wage is £9.40 an hour. The latter takes into account the increased costs of living in the capital. When compared to the National Minimum Wage of £6.70 an hour for adults aged 21 and over, and £5.30 for those aged 18 to 20, it isn’t surprising that many employers still choose to pay the lower rate. New legislation set to come in next month will require employers to pay workers aged 25 and above a National Living Wage of £7.20.

Employers are currently able to save some 23% per employee per hour by sticking to the National Minimum Wage, whilst the difference between the National Living Wage and the Living Wage is just 15% per hour – so why bother?

At Stephenson Harwood, we believe the arguments in favour of adopting the (London) Living Wage can be succinctly summarised as

• because it is good for your business;
• because it is good for the communities in which your business operates and in which your employees live; and
• because, in its plainest terms, it’s simply the right thing to do.

What is the value to your business of adopting the Living Wage?

The fact that the Government has woken up to the National Minimum Wage being simply insufficient, and has consequently introduced the National Living Wage, serves to highlight the importance of paying workers a fair and reasonable wage. The cost to your business of not paying such a wage should not be overlooked.

The impact on your workforce, the community local to your business and the communities from which your workforce come cannot be underestimated. As a basic starting point, paying a fair wage tells your employees that their well being matters to you and your business as much as your bottom line.

There has been much research into the relationship between happiness and productivity in the workplace. A report in the Harvard Business Review includes analysis from hundreds of studies showing an average of 31% higher productivity, 37% higher sales and 300% more creativity in workforces where there was a general feeling of ‘happiness’. While the old adage of ‘you can’t buy happiness’ may well be true, paying workers a higher wage does appear to be a factor in their happiness and, therefore, productivity; paying more speaks volumes about the perception of employees’ value by the organisation.

Increasingly, businesses look for suppliers who share their ethical ethos. At Stephenson Harwood, we’ve recently adapted our tendering process so that preference is given to organisations which make significant efforts in their Corporate Social Responsibility (CSR); paying the Living Wage is a fundamental component of our measuring system. We know that this is also true for our clients, who are increasingly asking for examples of our CSR activities during the tender process.

The community in which your business operates also benefits from your employees having higher incomes. Simply put, they’re more likely to spend money if they have it. Whether it’s the local sandwich shop or cobblers, they too will feel the benefit. The same is true for the communities in which your employees live – and in London particularly, employees come from far and wide.

The Stephenson Harwood approach

Over recent years, it has become an unavoidable reality that the disparity between the highest and lowest earners in the City – and sometimes also within individual organisations – has grown. As a firm, we felt that paying the London Living Wage to our lowest earners was the decent thing to do.

In addition to paying our employees at least the London Living Wage, where we are entering into any new contract, we ask our contractors as part of the tendering process to ensure that all of their employees who are allocated to work on our contracts are also paid the Living Wage for the area in which they work. Where we can make a more significant difference is in relation to our suppliers, and we couldn’t reasonably have expected them to pay the London Living Wage if we weren’t also doing so.

We see the Living Wage as a key factor in our being a responsible business, something we take very seriously. It touches on other parts of our CSR programme aimed at improving social mobility. Our partnership with the Stephen Lawrence Charitable trust, through which we aim to challenge and raise the aspirations of youngsters for whom law and other professions may not seem a natural choice, is just one example. Paying the London Living Wage is an essential component of our wider CSR programme.

Paying the London Living Wage is something that was supported across the partnership at Stephenson Harwood and welcomed by our employees, the majority of whom earn significantly more than the London Living Wage but want to see all those who work for us and with us treated fairly. Since 2001, the Living Wage campaign has impacted positively on tens of thousands of employees and their families, adding over £210 million to the wage packets of some of the lowest paid workers in the UK.

All of these are good reasons for adopting the Living Wage, but whatever arguments there may be, it all comes down to this: it is simply the right thing to do.

For more information about the Living Wage, please visit: www.livingwage.org