How Will The Pandemic Affect Future Pay Levels?

The economic turbulence resulting from the pandemic is likely to have an impact on future pay levels – what’s less clear at the moment is in which direction. Many of the news headlines seem to indicate pay levels are generally unlikely to rise. Yet there have also been suggestions that the pandemic could actually turn out to be an opportunity to address the ongoing problem of low pay levels.

The Resolution Foundation is one organisation that believes this should be the case. It has set out its thoughts in the report “A new settlement for the low paid: Beyond the minimum wage to dignity and respect” released at the start of June.

The report points out it has actually been workers at the lower end of the pay scale who have been essential for keeping the UK going during the pandemic. It highlights statistics such as the fact that it’s the lower earners who are more than twice as likely to be in roles that directly expose them to health risks.

The report also estimates that at least 20,000 and even potentially up to 160,000 workers are not receiving the legal minimum wage and over half of care workers are receiving less than the real living wage.

The Resolution Foundation wants action to be taken. One of its key proposals is the idea of the introduction of wage boards in the sectors that need more effective management of working standards as a whole, including pay levels.

It proposes the first sector this needs to happen in should be social care and suggests these boards should be comprised of employers, employees and other independent representatives.

There are several other recommendations made in the report to address pay issues. They include the extension of sick pay to lower earners (it’s currently unavailable to those earning less than £120 per week) as well as greater control over payment frequency. It proposes that fines for the underpayment of the minimum wage should be increased too.

The report also emphasises the importance of the proposed single enforcement body which is already part of the forthcoming Employment Bill. It stresses the need for it to be adequately resourced and given a sufficient level of power to properly protect employees and penalise any employers breaching the rules.

The pandemic will inevitably be shaping pay policy in other ways too, including views on what the National Living Wage (NLW) and National Minimum Wage (NMW) rates should be from next April.

The Low Pay Commission had launched a consultation on the subject in the middle of March, just a couple of weeks before the UK lockdown. The consultation originally focused mainly on gathering in opinions about the effects of the 2020 increases on companies and employees. But given the sudden change in business conditions over recent months, the focus has now broadened. While the official deadline has passed, the Commission has announced it’s continuing to accept responses until mid July to help inform its recommendations on what the NLW and NMW rates should be in the light of recent events.

The Low Pay Commission recognises the difficulties of providing responses given the dynamic nature of the current situation. But it remains keen to hear a spectrum of views.

It seems likely there will be a lot of different opinions about affordability for employers, and the potential impact on employment levels that are already taking a hit. Organisations and individuals can find more information here about how to submit their thoughts.

With so many different forces at play and so many variables to take account of, it is a challenging and uncertain period for many businesses.

What is certain however is that when it comes to making pay decisions, companies will need to have a firm grasp on their pay data. If you feel it would be helpful to know more about the real-time reporting features included in our HR software and payroll software, please do get in touch with us to find out more.