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Living Wage Versus National Minimum Wage

A recent Chartered Institute of Personnel & Development article has covered the debate that is being reflected in the business and political communities: is it no longer enough to pay employees the National Minimum Wage?

Cosmetics company Lush made the change to paying its London staff the living wage after it found out that some of its employees were taking second or even third jobs to make ends meet. While the move added £500,000 to the company’s annual salary bill, it has benefited through lower staff turnover, improved availability for shifts and higher quality candidates.

The living wage currently stands at £7.45 per hour (£8.55 in London), while the National Minimum Wage is £6.31 per hour for those aged 21 and over. The concept has been around for a long time and the Living Wage Foundation calculates how much someone needs to earn in order to afford a basic standard of living. It has become such a high profile issue because many of the jobs created in recent years have been in sectors, such as retail, catering and care, where pay rates are generally low.

While the article cites companies such as Lush and the Joseph Rowntree Housing Trust as those who have embraced the living wage, there are varying estimates of the cost of implementing the higher rate of pay nationwide – between 2% and 5%. Sceptics state that uncertainty over future increases would make businesses nervous about adopting it but there’s no denying that it has become food for thought in companies that feel they could increase staff motivation and engagement.

It’s recommended that HR leaders consider carefully the impacts – good and bad – of implementing the living wage. While the costs will be obvious, HR may have to think of new ways of working and other initiatives to offset some of the figures before presenting proposals to the CEO. The CIPD is currently researching the issue of low pay, including the debate between the living wage and the National Minimum Wage.

You can read the full article here: Should you pay the living wage?.