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Sandwell Metropolitan Borough Council Agenda Item16 REPORT TO CABINET 18 October 2017 Subject: Introducing the Living Wage Presenting Cabinet Councillor Steve Trow - Cabinet Member Member: for Core Council Services Director: Executive Director – Resources – Darren Carter Contribution towards Vision 2030: Key Decision: Yes Forward Plan (28 day SMBC12/10/2017 notice) Reference: Cabinet Member Approval Cllr. Trow – 28 September 2017 and Date: Director Approval: Darren Carter – 28 September 2017 Reason for Urgency: Urgency provisions do not apply Exempt Information Ref: Exemption provisions do not apply Ward Councillor (s) This is a boroughwide initiative Consulted (if applicable): Scrutiny Consultation Scrutiny have not been consulted on the Considered? proposal Contact Officer(s): Louise Lawrence, HR Service Manager [email protected] David Briggs, HR Delivery Manager [email protected] 1 DECISION RECOMMENDATIONS That Cabinet: 1. subject to further consultation with the recognised Trade Unions and the Joint Consultative Panel on 23 October 2017, agree for the Council to start paying the hourly rate set by the Living Wage Foundation, as a minimum, to all employees from 1 April 2018 in accordance with the details contained within this report. 2. subject to (1) above being agreed, agree to review the decision to pay the Living Wage, on a date after 1 November 2018 and annually thereafter. 3. in the event that any recommendations are made by the Joint Consultative Panel, the Executive Director – Resources, in consultation with the Cabinet Member for Core Council Services, be authorised to make any amendments to the Introduction of the Living Wage. 1 PURPOSE OF THE REPORT 1.1 For members to consider paying, as a minimum, the hourly rate of pay set by the Living Wage Foundation for all employees from 1 April 2018 and to agree to review this decision annually thereafter. 2 IMPLICATIONS FOR THE COUNCIL’S AMBITION 2.1 As the largest employer in the Borough, the council’s ambitions for 2030 are supported by a strong local economy underpinned by the positive impact that paying the Living Wage, as a minimum, to all its employees would have. 3 BACKGROUND AND MAIN CONSIDERATIONS 3.1. Background 3.1.1. On 1 April 2016, the government introduced a new minimum hourly wage rate for all employees aged 25 years and over - calling it the ‘National Living Wage.’ Since 1 April 2017, that hourly rate of pay has been £7.50. 3.1.2. Since this time, all Council employees have been paid, as a minimum, comfortably above this hourly rate, with the lowest point on the National Joint Council salary scale currently paying £7.79 per hour. 2 Nevertheless, there remains a long-standing commitment within the council to support employees at the lower end of the pay scale, by following the minimum hourly rate set independently of government by academics at Loughborough University, promoted by the Living Wage Foundation and called the `Living Wage.’ 3.1.3. This hourly rate is updated in November of each year, and is calculated according to the cost of living. It gives the minimum pay rate required for a worker to provide their family with what are considered the essentials of life. Since November 2016, the Living Wage has been £8.45 per hour, payable to employees aged 18 and over. It is next due to increase on 1 November 2017. 3.2. Considerations 3.2.1. Cost of implementing the Living Wage Clearly, in a time of continuing austerity, one of the biggest considerations of paying the Living Wage, as a minimum, to all employees, is the additional costs to the council and our community schools. Recent consultation with Governors and Head teachers about the possibility of paying the Living Wage has received firm support for the proposal, despite the fact that most employees on the lower pay bands who would directly benefit from paying the Living Wage are based in schools. 3.2.2. Removal of pay differentials Currently, it is anticipated that by introducing the Living Wage on 1 April 2018, this would have a significant and immediate impact on the Council’s pay and grading structure by increasing the pay of all employees in Pay Band A and almost half of employees in Pay Band B to the Living Wage rate. This, in turn, would mean that all affected employees would receive the same hourly rate of pay. It is anticipated that, as time goes by, more and more Spinal Column Points (SCPs) on the pay grading structure will need be increased to achieve the Living Wage rate. Based on a variety of current assumptions it is estimated that, by April 2020, all points in Band B would need to be increased. 3 3.2.3 Operational difficulties Removing the differentials between certain pay grades may cause operational difficulties in situations where, for example, an employee on Band B works alongside another on Band A. Whilst such situations are thought to be the “exception rather than the rule”, where they do occur, they would clearly need to be managed, sensitively, at a local level. 3.2.4 Ongoing Commitment Clearly, by paying the Living Wage, the Council and its community schools would be committing to year-on-year salary increases for a significant proportion of its workforce, that are determined by an external organisation and over which it has no influence or control. Alongside this, the Council will, nevertheless, continue to input to the National Joint Council (NJC) for Local Government Services pay and grading negotiation machinery. Currently, for a number of reasons, the NJC is considering a) changes to the national pay spine and b) the extent of future pay awards. Therefore, so as to mitigate against the risks that these future uncertainties bring, as well as the possible financial and/or legal risks associated with paying the Living Wage, it is felt prudent for the council to regularly review its commitment. It is proposed that the first review takes place in November 2018, and occurs each subsequent year thereafter, after the annual increase is announced by the Living Wage Foundation. If, following each review, the council considers that it wishes to continue to pay the prevailing Living Wage rate, the new rates will take effect from the following 1 April. 3.2.5 Job Evaluation and grading structure In order for the Council to continue to justify and defend challenges to its current Job Evaluation Scheme, it is essential that the current grading structure, including the current scale points matched against current job scoring, is maintained. This will ensure that the Council will not need to re-visit its current Job Evaluation processes or make any immediate changes to its pay and grading structure. 4 At a national level, there is the intention to work to ‘modernise’ future pay arrangements, minimising the impact on local grade arrangements as much as possible. Regional groups have been set up and Sandwell are actively involved, looking at options for a future pay framework for Local Government. Paying the Living Wage to affected employees through a non- consolidated, temporary “top-up” enables the possibilities of any changes to the national pay and grading structure not to be compromised and will help mitigate any associated risks. In Sandwell, the Living Wage would be paid to all employees whose basic hourly rate falls below the amount set by the Living Wage Foundation, irrespective of their age. 3.2.6. Local Award Ever since Sandwell MBC was created in 1974, it has paid full-time employees on Spinal Column Points 12 and below, £21 per year (i.e. £1.75 per month) on top of the respective amounts contained in the nationally-agreed pay rates. This amount is adjusted for part-time employees depending on the number of hours worked. In order to accommodate the Living Wage and make the council’s pay spine consistent with nationally-approved rates, it is proposed to end this particular supplement on 31 March 2018. 4 THE CURRENT POSITION 4.1. Within the West Midlands region, the following authorities are understood to be paying the Living Wage to their employees: Birmingham City Council Cannock Chase District Council Dudley Metropolitan Borough Council Nuneaton and Bedworth District Council Stoke-on-Trent City Council Stratford-on-Avon District Council Walsall Metropolitan Borough Council Worcester City Council Wychavon District Council and Wyre Forest District Council. 5 5 CONSULTATION (CUSTOMERS AND OTHER STAKEHOLDERS) 5.1 The Trade Unions have been consulted on the proposals contained in this report and shared with the school-based unions at a Joint Union Panel. Cabinet are being asked to approve the recommendations contained in this report, subject to further consultation with the recognised Trade Unions at the Joint Consultative Panel on 23 October 2017. 5.2. Consultation with Trade Unions remains ongoing at the time of writing this report. 5.3. Senior Management were consulted on these proposals in September 2017. 5.4 Governors and Head teachers of Sandwell Community schools are aware of the Councils proposals. 6 ALTERNATIVE OPTIONS. 6.1. Paying the Living Wage is a voluntary action. Therefore, the alternative to paying the Living Wage is simply to maintain the council’s current position by paying employees in accordance with the rates agreed by the National Joint Council for Local Government Services which, for Spinal Column Points 6 to 12, are supplemented by £21 a year local award. 7 STRATEGIC RESOURCE IMPLICATIONS 7.1. Provision will need to be made by schools in their budget plans and the Council in its Medium Term Financial Strategy to fund the Living Wage from April 2018. 7.2 Implementing the Living Wage would increase future budget pressures by committing to year-on-year salary increases for a significant proportion of its workforce, determined by an external organisation and over which the Council would have no control.
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