Should Your Company Adopt The Real Living Wage Standard?

real living wage 2021

The National Living Wage and National Minimum Wage rates are increasing from 1st April 2021. Workers aged 23 and over will be eligible for the National Living Wage of £8.91/ hour.  For those aged 21-22 the national minimum rate is increasing to £8.36 an hour with increases to the minimum development rates, younger workers’ rates and apprentice rates too.

Employers are legally required to apply these rates. But there’s another wage rate which, despite being voluntary, is being signed up to by an increasing number of businesses: the Real Living Wage.

What is the Real Living Wage?

real living wage UK

The Real Living Wage is calculated independently by the Resolution Foundation and draws on the minimum income standard which is calculated to give an accurate picture of the cost of living each year. The rate, which is overseen by the Living Wage Commission, is announced every November and must be implemented within six months of the date of that announcement to all age groups from age 18 upwards. This year, the rate that should be applied by the 9th May at the latest is £9.50, except for London where the higher cost of living is reflected in the higher rate of £10.85.

The adoption and impact of the Real Living Wage is something that’s been the subject of a CIPD report that was released this February as part of an extensive study examining organisations’ approaches to reward management. 18% of respondents were already accredited Living Wage employers. 19% were considering or planning to go ahead with accreditation. 18% were already paying the rate but were not accredited. The remaining 45% had no plans to pay it.

What are the barriers preventing the standard from being more widely adopted? One obvious answer could be the cost. But only 26% of non-accredited respondents indicated that it was the financial implications that prevented them from implementing it. As already mentioned, some companies are already paying the equivalent rate but haven’t as yet pursued accreditation. Others aren’t paying it but their responses suggest there’s limited internal impetus to do so from senior leaders. It seems that many organisations are not aware of the benefits that can accompany it. Yet according to the companies that are accredited, there are many positives associated with it.

What benefits have accredited companies experienced?

wage supermarkets UK 2021

The CIPD report found that 73% of accredited employers, or those who are planning on becoming accredited, cited the fact that it supports their employer brand. Around half say it has enhanced employee engagement and a similar proportion found it improved their customer brand. A third say it’s reduced employee turnover.

This echoes findings from other research that’s been highlighted elsewhere too. The 2017 Living Wage Employer Experience report from Cardiff Business School found that 86% of respondents believed their reputation as an employer and corporate entity had improved as a result of being an accredited employer. 75% had seen increased staff motivation, and employee retention rates had improved since they began paying the Real Living Wage. Other research has found associations with improved staff wellbeing, enhanced corporate reputation and social value, improved productivity and service levels, and recruitment and retention benefits.

Being a Real Living Wage accredited employer sends out a positive message to others

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Signing up to the Real Living Wage does send out a positive message about a company’s commitment to looking after its employees and their wellbeing. Over 7000 companies, including well-known names like Ikea, Nestlé and Aviva, have already signed up to the Real Living Wage. And with investors and customers, as well as employees, becoming increasingly interested in approaches to social responsibility, this is one way for employers to demonstrate their commitment by going above and beyond what is legally required. If you’d like to find out more about what is involved, you can visit the Living Wage Foundation’s website for further details.

Making the best strategic pay decisions for your organisation relies on having accurate and robust payroll and HR information and processes underpinning them. For over twenty years, Corporate Payroll Solutions has been providing payroll software, HR software and outsourced payroll services to organisations with between 100 and 15,000 employees. If you’d like to learn more about how we can help you, please do get in touch with us.