Millions of UK workers will gain an inflation-busting pay boost from April after the chancellor announced a rise in the National Living Wage to £9.50 from the current rate of £8.91. The 6.6% increase will amount to an extra estimated £1,000 or more a year before tax for the average worker aged 23 or over.
While the move is an important step to help low-paid workers, there are widespread concerns it’s not enough to offset the rising cost of living and cuts to benefits. The Living Wage Foundation says there will still be a “substantial gap” between the government-mandated minimum wage and its own calculations of a real Living Wage based on the cost of living. The campaigning group is therefore calling on employers to pay more than the government minimum.
Paying a fair salary for a hard day’s work is not only the right thing to do, but it makes smart business sense too, which is why we pay the real Living Wage here at NuServe.
But what exactly is the real Living Wage, what are the benefits for workers and employees, and how has introducing this impacted NuServe?
What is the real Living Wage?
The Living Wage campaign is an independent movement of businesses, organisations and people who believe workers deserve fair pay. It’s not to be confused with the much lower government minimum wage (re-branded to the National Living Wage in 2016). This is the minimum amount an employer is allowed to pay someone and is calculated as a % of median earnings (55% rising to 60% by 2024). While we can see the rationale behind this, it seems a rather blunt instrument. How do we know that 55% or even 60% is enough for someone to ‘get by’?
In contrast, the Living Wage Foundation sets what has become known as the ‘real Living Wage’. This is a voluntary pay scale that employers choose to adopt and is calculated against a basket of goods that people need to live, such as fuel, energy, rent and food. The wage is is set at £9.30 across the UK, rising to £10.75 in London where the cost of living is greater.
As a people-first company, NuServe is proud to be a Living Wager Recognised Service Provider. This means that all of our directly employed staff receive at least the Living Wage, and we always encourage our customers to do the same. We think it’s right that everyone who is prepared to work hard is able to earn a fair wage, and we’re determined to see the proportion of employees paid the real Living Wage increase across the country.
The costs of not paying the Living Wage in the cleaning industry
We should first acknowledge that the cleaning industry suffers, in general, from high employee churn rates and that wage rate is only one (albeit significant) factor affecting this.
With that said, when employees remain in a role, they develop experience of the site and get to know the customer’s needs and wants. Cleaning providers are also able to move beyond basic skill training and begin developing more advanced competencies. Paying a little more increases the chance of retaining and developing team members so that they, in turn, are able to deliver a better, more consistent service for the customer.
Furthermore, as cleaning companies grow, recruitment is often a challenge. There is seldom the luxury of time to fill vacancies, and ‘normal’ churn means the recruitment process is already under pressure.
Lower pay rates on particular sites will increase this churn, which results in an ever-growing list of vacancies to fill. We can only sympathise with the recruiter looking for a team of strong candidates to work at rates lower than are on offer elsewhere.
The customer impact from becoming a Living Wage cleaning company
So, how does this affect the customer? Well, the recruiter, under pressure to fill the role, and lacking a large pool of applicants to select from, is often forced to pick someone that might otherwise have been passed over. As the better candidates migrate to better paying jobs, the calibre of the team on the site with the lower wage rates diminishes.
Now, unable to hang on to a strong team, the cleaning company is working twice as hard to keep the client happy. Observing the declining standards, the client is spending more time than ever involving themselves in the management of the cleaning contract. Nobody is happy, not least the cleaners who receive a daily list of issues. The diamonds don’t stick around as the environment begins to take on a toxic edge. Everybody loses.
It’s therefore clear that paying the real Living Wage is good business, and the case becomes stronger each year. Let’s look at some of the benefits for both employers and employees alike in more detail.
The benefits of paying a real Living Wage
Reduces employee stress
Paying an employee enough so that their essentials are covered means they worry less about their finances and which expenses to pay each month to make ends meet. This lets them live more comfortably, knowing their basic needs are being met, which in turn massively reduces their stress.
Improves morale and motivation
Somebody who is paid the real Living Wage has a better work-life balance, as they won’t have to hold down multiple jobs to support themselves. This will make them happier and much better-motivated employees.
There are plenty of studies showing that when workers are happier, productivity increases. Paying fair salaries may well increase the overall wage bill, but this is more than offset by increased productivity.
Increases customer loyalty
As consumers, we are becoming more aware of how our purchases affect society in general. How you treat employees will therefore hugely impact what people think about your company. Customers are more likely to return to a business that pays its employees a decent wage than one that doesn’t.
Better employee retention and reduced turnover
Companies across the board face the challenge of retention. Insufficiently paid workers will always be looking out for more fruitful positions. Every time you lose a staff member, it costs you money to recruit, train and prepare a new employee. When staff receive a fair salary, they are more motivated to work and stay with the same employer.
According to a Living Wage Foundation study, 75% of businesses report paying the Living Wage has increased motivation and retention rates for employees, and 58% say it has improved relations between managers and their staff.
How businesses can mitigate against the additional costs
In an ideal world, there would always be a way to keep everyone happy: employees’ wages would increase, standards would improve, and costs would be reduced.
Certainly, there are many times when we have been able to achieve this here at NuServe. Whether through the renegotiation of the specification, a more efficient work plan, training, incentivisation of the team or simply better equipment, we’ve often been able to offset the additional wage costs with a saving in time.
During other times though, this is less feasible. At that point, it’s time for an honest discussion with our clients about what they really want to get from their cleaning service, and what’s fair and equitable for the operatives working onsite, often at unsociable times and with sacrifice to their family life.
Becoming a Living Wage cleaning company
As a cleaning company, we employ around 600 people, with the majority of those working on client sites where wage levels are, to a large degree, set by the negotiated tender price. Some clients are prepared to pay a little more to ensure staff receive the real Living Wage. While others, constrained by financial pressures, prefer to pay less, knowing staff will at least get the National Living Wage.
As of December 2019, across all our client sites, 51% of the jobs we provide pay at or above the real Living Wage. That percentage is trending in the right direction, up from 30% two years ago (a 70% increase). So, what impact has that had on our business?
Well, on those sites that we look after implementing the Living Wage, we’ve noticed a 20% reduction in employee turnover. In determining this employee turnover difference, we included only those employees who left our company voluntarily. If we include employees who left a site but remained in our employment (perhaps moving to another site), the figure is even more telling, with turnover 37% lower on sites paying the real Living Wage.
Our final thoughts
Paying anything less than a fair salary is in nobody’s interest. With more money in their pockets, people can enjoy a good standard of living, and local economies will thrive. And when wages more accurately reflect the cost of living, we create a more compassionate and just society.
If you’d like to find out more or simply want some advice, please feel free to get in touch with us at your nearest convenience.