The Living Wage – Information Pack for Members of the Overview and Scrutiny Management Committee 25 September 2013
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THE LIVING WAGE – INFORMATION PACK FOR MEMBERS OF THE OVERVIEW AND SCRUTINY MANAGEMENT COMMITTEE 25 SEPTEMBER 2013 1.0 INTRODUCTION AND BACKGROUND 1.1 What is the Living Wage? • The Living Wage is an hourly rate set independently and updated annually (in November). The UK Living Wage (outside of London) is currently £7.45 per hour. This figure is set by the Centre for Research in Social Policy at Loughborough University. In 2012, the Living Wage was increased from £7.20 to £7.45 (an increase of 3.4%). • The National Minimum Wage (NMW) is £6.19 for anyone who is 21 years and over (rising to £6.31 on 1 October 2013). Unlike the National Minimum Wage, the Living Wage is not a statutory requirement but a voluntary undertaking. Apprentices are excluded. • Based on a full-time employee working 37 hours per week, the Living Wage would be £14,372 per annum for Gloucestershire County Council employees. 1.2 A brief history of the Living Wage • Citizens UK launched the modern Living Wage campaign in the UK in 2001 with parents in East London. Today it is a national movement. The Living Wage Foundation, which is part of Citizens UK, is responsible for promoting, supporting and administering the formal accreditation of Living Wage Employers. Once accredited, organisations can display and use the Living Wage Employer’s Mark. 1.3 How is the Living Wage calculated? • The Living Wage calculation (Appendix1) takes into account the Joseph Rowntree Foundation Minimum Income Standard (MIS) research in which members of the public identify what is needed for a minimum standard of living. This is then combined with an analysis of the actual cost of living including essentials like rent, council tax, childcare and transport to produce the Living Wage figure. • It is important to note that whilst the Living Wage is focused on gross hourly pay, the Council does offer additional benefits to support our employees, most notably: - defined-benefit pension scheme (employer contribution c.24 %) - generous sickness pay entitlement - generous holiday entitlement - childcare voucher scheme offering significant tax/national Insurance reductions - enhanced payments for weekend, Bank Holiday and night working 1 1.4 Accreditation and the Living Wage Foundation • In 2011 campaigners and employers came together to launch the Living Wage Foundation. • The Living Wage Foundation works with employers to help them implement the Living Wage. It offers accreditation to employers that pay the Living Wage, or those committed to an agreed timetable of implementation, by awarding the ‘Living Wage Employer’ mark. • To be accredited as an official ‘Living Wage Employer’ an organisation must satisfy four basic criteria: 1. pay all of its own staff at least the Living Wage 2. commit that within six months of the annual uprating of the Living Wage, its pay rates will be uprated accordingly 3. demonstrate progress towards requiring any contractors to do the same 4. have a plan in place to work with any remaining contractors to get them to pay the Living Wage • Accredited Living Wage Foundation employers comment that the introduction of the Living Wage has enhanced the quality of the work of staff, improved loyalty and customer service, resulted in fewer complaints, improved retention rates and reduced absenteeism. They also comment that the Living Wage has increased consumer/community awareness of their organisation’s commitment to be an ethical employer. • It has also been argued that lower paid workers tend to spend a greater proportion of their income in local shops and on local services than wealthier people. 1.5 Who pays the Living Wage? • There are currently just over 350 organisations across all sectors (Public, Private and Third Sector) that are fully accredited to the Living Wage Foundation (Appendix 2). 16 Local Authorities have full accreditation, 7 of which are London Boroughs. • A number of organisations across all sectors have adopted the Living Wage on an informal basis (either permanently or temporarily) although it is difficult to ascertain an accurate understanding of this. Equally, a number of organisations have considered and rejected implementing the Living Wage. 2 2.0 LOCAL AUTHORITIES RESEARCH 2.1 What are other Local Authorities doing? • A growing number of Local Authorities in England and Wales have reviewed their position on Living Wage in the last few years. Gloucestershire County Council has contacted a number of authorities who have adopted differing approaches. • A survey by the South West Councils organisation in July 2013 (see Appendix 3) asked County/Unitary/District Councils for their current position on the Living Wage. Out of 35 respondents, 2 have implemented the Living Wage, 3 are ‘firmly committed’, 6 have decided not to implement and 23 are currently considering their options. • Our own research across a geographically diverse range of Councils has revealed 4 broad approaches being adopted: 2.2 Councils that have adopted the Living Wage in full • These Councils have successfully applied for full accreditation of the Living Wage Foundation and ensure all their employees (and agency workers) receive at least the Living Wage. They are also actively promoting the Living Wage to their contractors/sub-contractors and working towards fully implementing this requirement through their Procurement and Commissioning processes. They are predominantly City Councils and London Borough Councils. 2.3 Councils that have introduced the Living Wage but not full accreditation • Typically, these Councils have adopted the Living Wage rate at the time e.g £7.45 and agreed to review that rate each year following the annual uprating (in November). • These Councils expressed strong reservations about the ongoing requirement of full accreditation to implement the Living Wage to Contractors/sub-Contractors and the knock-on impacts on Procurement/Commissioning processes. They also expressed concern on the potential for the costs to fall on small to medium sized businesses who are less able to absorb them. • Typically, these Councils have adopted a ‘supplement’ approach whereby a separate supplement is paid to impacted employees in parallel to the existing pay and grading structure. This allows the existing pay and grading structure to remain intact while introducing a supplement that recognises cost of living pressures. 2.4 Councils that have reviewed and rejected adopting the Living Wage • These Councils have referenced a variety of reasons for rejection but most often citing costs (particularly in relation to schools), impact on salary/grading structures and the open-ended commitment to a Living Wage increase to which they have no control of the rate at which it is set. 2.5 Councils that are monitoring developments with no firm commitment to review • The majority of Local Authorities currently fall into this category although our research indicates that an increasing number of Council’s are aware of the Living 3 Wage campaign and acknowledge they will have to make a decision in the next few years. 2.6 Benchmarking • A benchmarking exercise has been undertaken covering both geographically close and similar sized Councils. Some useful examples to note are: • County Council 1: Cabinet rejection (April 13) as costs deemed too prohibitive. • City Council 1: implemented a ‘Living Wage supplement’ (subject to annual review) across 3000 staff (including schools) at a cost of £1.5m. They also subsidised schools for six months. They are currently considering a second year payment of a Living Wage supplement but dependent on ongoing negotiations with Trade Unions on wider Terms and Conditions rationalisation. • City Council 2: implemented a payment equivalent to the Living Wage (for one year 1st April 2012 to 31st March 2013). This affected 1,616 staff (including schools) at a cost of £1m (excluding on costs). They are currently considering their position for 2013/14 and will be dependent on negotiations with Trade Unions on wider Terms and Conditions rationalisation. • Unitary Council 1: Full Council agreed to fund and pay the Living Wage in February 2013 and implement in October 2013. Options currently being considered. • County Council 2: not implemented due to estimated cost of £1.2m. 4 3.0 COST AND INFORMATION ANALYSIS Contracts Below Living Wage Area Permanent Fixed Term Temporary/Casual Total GCC 95 24 0 119 Schools 555 99 123 777 Total 650 123 123 896 FTE Below Living Wage Area Permanent Fixed Term Temporary/Casual Total GCC 58.4 17.33 0 75.73 Schools 127.06 19.13 22.72 168.91 Total 185.46 36.46 22.72 244.64 Cost of Implementing the Living wage with Estimated On Costs Area Permanent Fixed Term Temporary/Casual Zero Hour No - Mo Total GCC £109,166 £30,533 £0 £18,780 £2,678 £161,157 Schools £240,763 £32,540 £39,439 £25,491 £2,260 £340,493 Total £349,929 £63,073 £39,439 £44,271 £4,938 £501,650 • Data as at 11 September 2013 3.1 Headline summary • 896 employees impacted. • 87% (777) are in Maintained schools (Community and Voluntary-Controlled) roles. 13% (119) are in GCC related roles. • Total cost of implementing Living Wage at £7.45 per hour is estimated to be c. £501,000 of which £340,000 is in Schools. This excludes Apprentices and outsourced services that are provided to the Council and schools. 3.2 GCC (non-schools) - Permanent and Fixed Term contract employees • There are 119 GCC employees in this group currently paid below the Living Wage. Of this number, 21 are in administrative roles and 98 are in Manual Roles. 49 of the manual roles are in Gloucestershire Industrial Services Healthcare (GIS) employed as Workshop Operators. The other significant group are School Crossing Patrol employees with the remaining employees undertaking a variety of roles such as Kitchen Assistants and Car Park Attendants.