10% Pay Rise For Thousands Of Workers As Government Announces Increase In Real Living Wage

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10% Pay Rise For Thousands Of Workers As Government Announces Increase In Real Living Wage

Author: Laura Spence

Key Contact: Claire Knowles

What is the real living wage?

The Real Living Wage (RLW) started 20 years ago, following a campaign which revealed serious issues with low pay. People were “surviving rather than thriving”. It is now a commonly accepted standard for employers to sign up to.

It’s calculated by independent bodies and reflects the amount an individual needs to not just live, but to enjoy life. The RLW is now £11.44 per hour, and £13 in London. 14,000 employers are “accredited” by the RLW, and many more pay their staff in accordance with the guidelines. At least 350,000 workers in the UK benefit from this. Care workers in Wales are among the many who benefit from the RLW, benefiting from Government changes last year making it compulsory.

The benefits:

With the cost of living crisis driving thousands of low-paid workers to food banks and struggling to pay for basic necessities, the rise seems like welcome news. A recent study from the Real Living Wage Foundation found the following benefits for employers:

  • Meeting organisational missions and values.
  • Various HR management effects, including recruitment and staff retention.
  • The RLW is already implemented by large companies including Aviva, Burberry, Ikea, KMPG and Nationwide, so getting on board will help employers compete with their competitors for talent.
  • External benefits, such as better ability to attracts customers, secure contracts and investment.

Concerns:

The study also revealed some negatives; for example, an increase in direct labour costs and increases to indirect costs through the need to monitor contractors. There was also some disruption to internal pay structures.

Some employers are also struggling to recruit the right skills. According to the CIPD’s analysis, over half of respondents felt like last year’s increase had a significant impact on their pay bill and ability to fill vacancies.

So with the RLW rising, what will this mean for employers?

Looking ahead:

National minimum wage has now been aligned with the RLW meaning. This means that employers have no choice but to pay workers aged 23 and over at least £11.44 from April 2024.

The increased rate may have a knock-on effect for many organisations, with those in retail, hospitality and care being hit the most, as they run on low-paid workers. Some employers may feel obliged to pay more than the minimum rates, to compete in this “employees’ market”.

Increasing prices of goods and services is one way to offset the increased rates. However, this may not be sustainable in the long run. Instead, to ensure organisations can generate the money needed for higher salaries, we suggest employers explore ways of improving workplace productivity. Making sure the organisation has both good people management and business management practices in place is a good start.

For advice regarding the Real Living Wage, contact our Employment team.

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