The TUC has welcomed the increase in the living wage rates but warned that too few large employers have committed to paying it despite an £83bn increase in their cash reserves over the last five years.
The living wage is a voluntary rate of pay designed to help low-paid workers to afford a basic standard of living. The new rate is £7.65 an hour, and £8.80 an hour in London. The adult minimum wage rate is £6.31 an hour.
Figures from the Office for National Statistics (ONS) show that the UK’s biggest companies increased their cash reserves by £83bn between 2007 and 2012. But some employers are refusing to use these rising cash reserves to offer decent wage rises that would increase demand in the economy, says the TUC. Instead, workers are suffering the longest wage squeeze in over a century and in-work poverty continues to grow.
Although hundreds of employers have adopted the living wage in the past year, the TUC believes that far more companies can afford to sign up to this important benchmark. There is no excuse for cash-rich employers to deny low-paid staff a decent wage, says the TUC.
TUC General Secretary Frances O’Grady said: “The rise in the living wage will mean a big income boost to thousands of low-paid workers across the UK.
“But many more low-paid workers should receive the living wage. Many large employers, in particular, can afford to pay a living wage, but are choosing to sit idly on rising cash piles rather than use their resources productively through better pay rises.
“With a 20p per hour pay rise giving a full-time worker an extra £400 a year, fair pay is by far the most effective way to tackle the cost of living crisis and make work pay. Britain needs a pay rise and signing up to the living wage is an important way to achieve it.”
However, Neil Pickering, Director at Workforce management solutions company, Kronos said:
“It’s great to hear positive discussions about increasing the minimum wage to a liveable wage. Our recent research report, ‘The Forgotten Workforce’ suggested that low pay is one of the biggest causes of workplace unhappiness, therefore any increase in the minimum wage should be viewed as positive.
“However, whilst raising the living wage will provide a welcomed boost for low paid employees, it presents another hurdle for those businesses struggling to cut costs. In today’s difficult financial climate, where every penny is being counted, many businesses simply cannot afford to provide all their employees with a pay rise. As a result, organisations need to look towards technology to help streamline processes and control cost in other areas, such as workforce management solutions which enable businesses to measure characteristics such as time and attendance and make better decisions about where, when and how to allocate resources.
“As well as driving better business efficiency and profits, workforce management solutions can significantly improve employee engagement – providing employees with the flexibility and control over their working hours that so many desire. By putting in place the right technology now, organisations can not only keep costs to a minimum, but ensure they treat their front line staff as people, not simply as numbers on a balance sheet.”
New UK Living Wage is £7.65 and new London Living Wage is £8.80
Over 30,000 low-paid workers stand to get a pay rise of up to £400 a year because they work for companies signed up with the Living Wage Foundation as a Living Wage Employer.
The UK Living Wage rate rose today by 20p to £7.65 per hour, and the London Living Wage rate rose by 25p to £8.80 per hour, as announced by Mayor of London Boris Johnson at Great Ormond Street Hospital.
The Mayor of London Boris Johnson, said: “More and more London firms are recognising the benefits of fair remuneration for all of their workforce. Paying the London Living Wage ensures hard working Londoners are helped to make ends meet, providing a boost not only for their personal quality of life but delivering indisputable economic dividends to employers too. This in turn is good for London’s productivity and growth. It is extremely heartening to see major new companies signed up this year but we need more converts. I hope we can spur on even more organisations to do the right thing.’
At the London event Boris Johnson was joined on stage by Lacey Green, a bar worker from Faucet Inn, the first pub chain to sign up to the campaign.
Lacey Green, said: “This has made a big difference to me and my 5 year old son Tyler. I can now send Tyler to karate and football after school. We couldn’t afford to do that before.”
A total of 432 employers are now signed up to the campaign, up from 78 this time last year. This includes employers Legal and General, KPMG, Barclays, Oxfam, Pearson, the National Portrait Gallery, First Transpennine Express, as well as many smaller businesses, charities and town halls.
Together they employ over 250,000 workers and also commit to roll out the Living Wage in their supply chain.
Rhys Moore, Director of the Living Wage Foundation said: “Living Wage Week is about employers taking a lead and tackling the problem of low pay. The Living Wage has become a must have badge of honour for employers. By looking out for the Living Wage badge you can now choose to support businesses that are doing right thing. It works just like Fairtrade and will grow even faster with consumer support.”
The charity Citizens UK has been leading the campaign on the Living Wage for over 10 years.
Rabbi Miriam Berger said “Citizens UK brings together people from every part of society who work together for the common good. This is a call to action for responsible employers. We are thrilled that so many companies are already signed up, but there are many more that could pay the Living Wage. The CBI are meeting in London today and we call on them to respond positively to the challenge.”
Ed Miliband, Leader of the Labour Party said: “Hundreds of businesses, charities, Labour councils across Britain, and the Citizens UK Living Wage campaign are already showing how we can make work pay. A One Nation Labour government will work with employers in both the public and private sector to tackle low wages. Together we can help lift more people out of poverty with decent pay, raise productivity, and control spending on welfare.”
New research from KPMG underlines the importance of continuing to tackle the problem of low pay in Britain. The number of workers in the UK paid less than the Living Wage has grown in the last year by 400,000 according to KPMG, from an estimated 4.82m to an estimated 5.24m now.
Marianne Fallon, Head of Corporate Affairs at KPMG, said: “For many businesses, paying the Living Wage need not actually cost any more. At KPMG, we have found that better staff performance and motivation combined with lower absenteeism and turnover cancels out the extra salary costs.”
Dominic Johnson, Employee Relations Director, Barclays said: “We’re a proud and long-standing supporter of the Living Wage. This is not only the right thing to do, but good business. Early research on the impact of the Living Wage for cleaners on Barclays’ contracts shows our suppliers have a 92% retention rate versus an industry average of 35%.”
Jan Filochowski, Chief Executive of Great Ormond Street Hospital who signed up to the Living Wage earlier this year said: “The Living Wage is about fairness and investing in people. By signing up to the Living Wage this year we are demonstrating the value that we place in each and every person who works at Great Ormond Street, and the important role they play in creating the best possible experience for our patients and families.”
The Living Wage is independently set each year, according to the basic cost of living in the UK. It is updated annually and employers choose to pay the rate voluntarily. The rates are higher than the legal minimum wage, which stands at £6.31 an hour for over-21s.