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Paying the Living Wage benefits business as well as employees

Blog posted by: Jenny Rouse (November 4, 2013)

This week, nef and 400 other accredited Living Wage employers are celebrating Living Wage Week

The newly announced Living Wage rate of £7.65 per hour (£8.80 per hour for London) is substantially higher than the current minimum wage of £6.31 for those over 21. The Living Wage is based on research by Loughborough University which asked people to list the items they felt an individual would need to live a minimum acceptable standard of living. The final list includes housing and transport, as well as household items and one-off expenditures such as a washing machine and birthday presents.

While it would be difficult for even the most hardened of employers to argue that they do not think they should pay employees enough to allow them to buy birthday presents for their family, many businesses argue against paying the Living Wage on grounds of affordability. Yet while paying a Living Wage may mean bigger outgoings in the short term, evidence shows that fairly paid workers are ultimately better for business.

One study found that when employers transitioned to paying at staff at least Living Wage they experienced significantly lower rates of staff turnover, reputational benefits, reduction in sick leave, better motivated staff and an increase in productivity. A massive 80% of employers felt their staff delivered better quality of work after paying them the Living Wage, with 75% of employees agreeing that their work was improved. One major UK firm found that paying contractor staff a Living Wage had cut staff turnover by half, saving them £75,000 on the value of a single contract.

The Living Wage movement has grown at great speed since the Living Wage Foundation first offered accreditation in 2011. While this is encouraging, paying a fair wage is just one part of being a good employer. Individuals with high well-being at work are those who are paid fairly, have job security, a sense of autonomy and the potential to progress. And again, employees with high well-being are better employees overall - for many of the same reasons identified in the Living Wage study.

Organisations need to think much more widely about their business decisions and not just focus on short term profit-loss accounts. Whatever the ethical issue at hand, whether it be employee welfare, carbon footprint or procuring from the local economy, the same argument holds true: often the ‘right thing to do’ is the right thing for everyone - business included.

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