Managing Your Cash Flow

The reasons why eight SME leaders chose to implement – or encourage – the Living Wage

14 min read

23 May 2016

With the National Living Wage (NLW) still being met with reluctance, we asked eight small business leaders what they thought of the Living Wage – and why they embraced it.

Image: Shutterstock

Aviva’s approach to the Living Wage has been one of gradual implementation, with the company first having adopting the London Living Wage and then the UK NLW in order to recognise its social responsibility to stakeholders and – most likely – to manage the brand risks which emerged around living wage issues.

When campaigns aimed at the FTSE 100 by TELCO and the Greater London Authority began in 2003, the company embraced the Living Wage. Joanne Goddard, head of CR governance and engagement at Aviva explained: “We signed up without much hesitation. The upside was hugely beneficial to the employees affected and the impact on costs was minimal. It was also the right thing to do.”

Similarly, Barclays’ initial engagement with the Living Wage movement began after a meeting with TELCO. Taking account of concerns raised by the campaign, Barclays made a commitment to increase its rate of pay and improve the working conditions in its Canary Wharf office.

Dominic Johnson, employee relations director, suggested: “Having supported the Living Wage for over ten years, we know that it can improve productivity, morale and retention rates. This is not just an expression of our corporate values or an issue of social impact, but good business sense”.

These are just two examples of the many reasons that led firms to hop onboard the Living Wage bandwagon. Take KPMG, which, according to Guy Stallard, head of facilities, thought of the Living Wage as a “change management programme which helped firms consider how to redefine service level in terms of values, not just what people get paid”.

How can SMEs offset the cost of the National Living Wage?

And when it came to Penrose Care, co-founder Robert Stephenson-Padron suggested that if the business was to deliver its service as a care provider, then this obligation should be extended to employees.

But what about smaller firms? We spoke to the leaders of SMEs to gauge their take on the Living Wage, as well as why they chose to implement it.

1) Jonathan Whittaker, senior partner at law firm SAS Daniels

According to Whittaker, SAS Daniels had started to pay the Living Wage long before the government introduced it. And, while he stressed that some companies pay it to boost CSR credentials and get accredited by the Living Wage Foundation, the company’s core reason was because it believed in paying a fair wage for a day’s work.

“It hasn’t been difficult to manage but we have done it very carefully and we had to decide where to draw the line and for us that was to pay the going rate commercially,” he said.

Whittaker added: “The main benefit for us is that for roles in our company that are at the lower end of the pay spectrum, we tend to find that we can choose from a better pool of candidates as our rates of pay tend to be better than equivalent roles in other organisations.”

Read on for the firm seeking to decrease stress and the HR director’s take on how the Living Wage will give you a competitive edge.

2) Robert McKechnie, managing director of TenTel

As for McKechnie, he explained that, quite simply, better paid staff nurture a happier, more productive workplace environment. 

“Our workforce has shown exceptional commitment, driving our young business to flourish in a competitive market,” he said. “We have also found that we’ve experienced less employee absence than the expected average, something we certainly attribute to the positive work environment created by offering the Living Wage.”

By offering the Living Wage, he stressed, the company has been able to attract a high calibre of employees. “We want to provide our employees with a supportive work environment, and expect them to be fully committed to the company and be passionate about helping the business to grow. As we had always expected to provide the Living Wage as a minimum, there was never an issue about adjusting our business plan to allow for the increased spend in wages. And we believe if we can provide a higher wage as standard, other businesses should be able to as well.”

3) Karim Peer, CEO of Balmoral Financial

Financial wellbeing company, Balmoral Financial, has also considered the advantages that the national living wage presents for its clients across both the private and public sector, with Peer suggesting the firm “recognises that if members of a team are feeling happy, secure and supported, they will be more productive and the business will benefit in the long run.“ 

“UK employers can help ease this stress by ensuring that employees feel as supported as possible,” he said. “By increasing salaries in line with the NLW, and by providing access to other services such as financial education or a low cost loan repaid via an employee’s salary, employers can improve their staff’s overall sense of wellbeing as well as their financial wellbeing.”

Four ways to navigate Living Wage and auto-enrolment changes

4) Steve Foulger, HR director at allpay

Besides being a preffered ingredient for a happy team as Peer suggested, Foulger added that it would give small firms a competitive edge.

“Many businesses in the UK will see the introduction of the NLW as a costly set-back, expected to drain both financial resources and energy,” he said. “But as the HR director for allpay, the first company to sign up to the Living Wage in Herefordshire, a voluntary scheme that pre-dated the more formal and lower rate, mandatory NLW, I can assure businesses that it should be seen as a positive and any effort put in at the outset will be more than worthwhile in the grand scheme of things.”

Of course, Herefordshire is said to be one of the lowest paid counties in the country, as such this is no mean feat for the business to have achieved an accreditation. But it has meant, according to Foulger, an overall improvement in attracting and retaining talent.

“Talent acquisition can be difficult for companies outside of London, but the NLW and its more stretching predecessor Living Wage, has given us a competitive edge that we didn’t have before,” he added. “Essentially, unless employees feel valued and motivated, they will have no desire to drive business forward. Just like the Apprentice Levy the benefits outweigh the costs.”

Curious about BrewDog’s take on the Living Wage? Then read on.

5) Michelle Wright, founder and CEO of Cause4

Wright is of the belief that since implementing the Living Wage, the way the company recruits has changed.

“Moving towards the full Living Wage as a basis to pay our staff has been an important development for Cause4,” she claimed. “We have grown our business based on developing graduates through our Entrepreneurship development programmes looking to support the growth of future leaders for the charity and social enterprise sectors.”

Embracing the Living Wage, Wright said, has hence made it easier for graduates on the scheme as finance would no longer be deemed a primary concern.

“We currently employ over 30 graduates and the move to Living Wage status has made a huge difference to how we approach recruitment and how valued our staff feel,” she claimed. “It also helps us attract a broader, more diverse, field of candidates from all backgrounds. Employed staff should be able to live comfortably and this approach makes a key difference to our ability to attract the best talent from the widest range of backgrounds.”

Charlie Mullins: If you can’t take the National Living Wage heat, get out of the business

6) C-J Green, group HR Director at Servest

Green suggested that while it may be the right thing to do, she realised there were a few challenges that kept some employers at bay.

“I am a huge supporter of the Living Wage; people should earn appropriate pay rates that not only make them feel valued, but also help them to live a high quality life,” Green said. “As employers, it’s our obligation to ensure that this is the case. However, there are of course associated challenges with a broad wage increase. There is a risk that uplifting entry-level workers’ wages will close the gap between tier one and tier two staff; for example, if the increases aren’t adopted company-wide, operatives may earn a similar rate of pay to their supervisors.

“The key challenge is avoiding the situation where you’re inadvertently devaluing the more senior members of the team who earn slightly above the minimum wage. Employers need to be cautious of the next level; specifically, the ‘knock on effect’ the Living Wage may have across the board. The NLW campaign doesn’t just affect those on minimum wage after all; it should, therefore, be thought of as a whole picture.”

7) Paraic Begley, general manager and COO at Sugru

Begley, however, claimed that while the benefits being offered to companies is paramount, the key reason for embracing the Living Wage, in Sugru’s case, is to boost employee work-life balance.

“At Sugru, we passionately believe that all our employees deserve to make the most of their lives and have the opportunity to experience important things such as family life and pursuing hobbies and interests,” Begley said.

He added: “We strongly believe in fairness and we are delighted to see more businesses adopt this too.”

8) James Watt, co-founder of BrewDog

“BrewDog is an eclectic collective of passionate people committed to great craft beer,” Watt said. “All of them, from our talented brewers to our awesome bar staff, are integral to our success and growth so we wanted to reward their passion and dedication by guaranteeing a fair wage for all. All of our staff will receive a wage that will afford them a good standard of living wherever they might be located.”

This, he claimed, should be a wakeup call for employers, especially in the hospitality industry. 

“What should be a respected profession is often still regarded as a university stop gap,” claimed Watt. “No other bar division has ever looked beyond legal minimum wage or legislative parameters in committing to salary levels for staff. But we want this to provide a call to arms for the industry to pick up its feet and set new standards.”