Five reasons to pay the Living Wage

Guy Stallard is head of facilities for KPMG UK. Responsible for a team of over 700 staff, Guy is also a member of KPMG UK’s Corporate Responsibility Leadership Committee, a member of the Living Wage Foundation Policy Group and represents business as a commissioner on the Living Wage Commission. Read NCVO’s comment on the report by the Living Wage Commission

Since becoming involved in the Living Wage in 2006, I have seen the campaign become a widespread initiative on which political parties and businesses have to take a view. With nearly 800 accredited organisations across many industries, the Living Wage clearly resonates with responsible employers. My own employer, KPMG, has been a Living Wage employer for over eight years.

As well as being widely lauded as ‘the right thing to do’, paying the Living Wage also makes good business sense.

Benefits of the Living Wage

Research has highlighted just as many benefits for the employer as the employee and here are just a few examples that we at KPMG and other accredited businesses have seen.

1. Better performance and engagement

Employees receiving the Living Wage demonstrate higher motivation and perform better.

2. Reduced turnover and absenteeism

Staff receiving the Living Wage are more motivated to come to work and stay with the same employer. At KPMG, turnover of contractor staff has almost halved since we began paying the Living Wage – the benefits of providing increased stability of the workforce can never be overstated.

3. Improved morale and motivation

Workers are more committed to their job and, as a result, are more positive to changes in role and taking on more responsibility. People have an improved work-life balance as they do not have to work longer hours or hold down multiple jobs to have a basic standard of living

4. Relatively small increase in wage budgets

The savings made through lower recruitment churn, reduced absenteeism and better performance mean that paying the Living Wage can be cost neutral if managed in partnership with suppliers.

5. Responsible business

If business is to restore trust it needs to look after the welfare of its staff. The minimum wage simply does not pay enough for families, in particular, to live on.

An increasing number of organisations, including some of the major FTSE100 UK businesses, have already taken the initiative to become accredited Living Wage employers – committing to paying their direct and supplier employees the appropriate geographical Living Wage rate.

Staff working in service industries such as cleaning or catering, typically benefit the most from receiving the Living Wage. But, buyers are often reluctant to pay above the minimum wage due to pressures to procure only on labour cost rather than considering the value of the service being procured.

The requirement to also pay supplier staff the Living Wage requires a proactive attitude towards procurement of contracts – considering overall contract value and quality of service as opposed to only considering ‘spreadsheet cost’ of hourly pay.

If customers consider what they want their contractors to deliver rather than how many hours they will purchase, they would be able to identify a contractor that delivers a quality service while also ensuring staff are appropriately paid.

The Living Wage at KPMG

We worked with our cleaning contractors to focus on results and reconsider how work was carried out. Focussing on results rather than being overly prescriptive about how are cleaners achieved them allowed our suppliers to build a programme which delivered financial value and the quality of cleanliness we require.

Using the very simple example of window sills; rather than outlining in the contract that the cleaners wipe the sills every two days, we specified they needed to be kept clean and the cleaners were trusted to use their judgement to clean the sills when needed. The personal waste bins that used to sit under every desk in every office were replaced with communal recycling and waste bins, saving the cleaners the lengthy task of emptying them each night. Contractors were achieving the targets set out in their contract, and taking less time in doing so.

A thousand hours at £6.50 is cheaper than it is at £7.65. However, the challenge is looking at value of what is being delivered. Good cleaning defers the need for large capital expenditure, and when working with a motivated workforce it is unlikely a thousand labour hours will still be required. Research has shown that paying fairly is a win for staff but also for the employer.

How does this approach become common practice?

It will take time to adjust especially where those procuring services need to invest more time and effort upfront with prospective suppliers to achieve a result which works for the buyer organisation and means staff can be paid a Living Wage. Suppliers and contractors must push the benefits of being goal-oriented against the notion of being cost focussed, making their clients aware that the benefits breed more benefits. Staff motivated and committed to their job being able to achieve results in less time means that everyone is a winner.

All organisations should now be determining how to pay a Living Wage to direct staff and on-site contractor staff while remaining profitable. Following in the footsteps of accredited Living Wage employers should be the mantra for all.