HR Expert: Becoming a real Living Wage employer

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Q. After seeing a notice that employers accredited by the Living Wage Foundation have until 1 May 2024 to increase pay to the real Living Wage, my client is interested in becoming a real living wage employer. This is because they think it will help them to attract the best staff and provide the best service to their customers. Can you help me to explain what the real living wage is, and the implications for my client, who is a small domiciliary care provider, should they go ahead with this? Currently, they pay National Minimum Wage (NMW) and the National Living Wage (NLW) to staff who are 21 and over?

A. It’s true that becoming a real living wage employer can help your client to attract staff, especially as they operate in a low paying sector where wages are not typically that high. The real living wage is a voluntary initiative that employers can choose to join, which seeks to persuade employers that paying people more than the minimum wage is good for business.

It takes as its starting point when setting its rates (there is one for London and another, lower, one for the rest of the UK) as the needs of the employee, rather than the employer, and tries to reflect the actual cost of living. This is in contrast to the National Minimum Wage, which is the legal minimum pay employers must give. Both NMW and the real living wage are reviewed annually and typically increased.

Before making the change to the real living wage, your client will need to carefully assess their finances. The current rates are £13.15 in London and £12 for the rest of the UK. This will need to be factored into your clients’ calculations for their hourly rates, and they will have to consider if this will mean losing some of their business, such as a local authority whose set rate is lower than the hourly pay rate, as it would not be profitable to continue with that work.

Another consideration for your client is that once they have made the change to the real living wage, it will not be straightforward for them to revert to NMW and NLW. Whilst they would be able to do so for anyone starting after they have decided to reduce their pay rates, they will have to consult with existing staff over reducing their pay, and are likely to meet with some resistance. If their staff are not willing to accept the change your client may have to begin consulting with them over changing the rate, which could lead them to losing these staff to other employers or even facing claims for constructive dismissal or unlawful deduction of wages. This could lead to reputational damage for the business and impact its ability to attract new staff.

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