When is a minimum wage a living wage?

By Mark Linehan, Managing Director of the Sustainable Restaurant Association

“We believe that an economy in which an adult has the reasonable expectation of earning a decent living is one where dignity and respect are perpetuated. We advocate for a Living Wage as a norm.”

These are the words of a pub landlord, not a politician. Andrew Fishwick, owner of the Truscott Arms made this admirable statement. And when he did, he was talking about paying his staff the Living Wage, which in London is £9.15 an hour.

Yesterday, the Chancellor announced his own new version of the Living Wage. He decreed that all over 25s would have to be paid a minimum of £7.20 an hour from April 2016. That’s 70p up on the current rate paid to over-21s.

The industry has been quick to respond, saying it’ll cost the industry dear. Indeed Martin Couchman deputy chief executive of the BHA was more outspoken, saying: “With less than a year’s notice many employers will be getting the cold flannel pout and starting to look at the impact now of this news.”

He did add that the increase would be mitigated by the cut in Corporation Tax and reductions in the cost of Employers National Insurance.

Kate Nicholls, CEO of Association of Licensed Multiple Retailers also welcomed the Chancellor’s plans to increase apprenticeships.

The hospitality industry has been talking about creating career structures, making the sector an attractive career option for young people with a pathway, continual development and training. And giant strides have been made in recent years. Apprenticeships in restaurants and foodservice more widely are having a really positive effect and in the last government the sector created one five jobs.

But the fact remains that a large proportion of people working in hospitality are low paid, staff turnover is high, many don’t stay the course and a good number of those that do experience a poor standard of living – reliant on tax credits and other state assistance.

While it’s irrefutable that a genuine Living Wage comes with a significant upfront cost, there is a very strong case for it provingcost effective in the long term.

And who are the real winners in this anyway? Certainly not the under-25s who’ll have to wait for that milestone before they can appreciate the new-found riches of their older colleagues. With the government taking away tax credits, its solution is to make employers step up and pay their staff a wage they can live on, without actually hitting the mark. The Chancellor has imposed a rate of pay (it grates calling it a Living Wage) below what the Living Wage Commission has calculated is required to sustain a basic standard of living, leaving thousands of workers as the losers.

Perhaps Mr Osborne should have listened his colleague Boris Johnson, who in a speech at the Hospitality and Tourism Summit, just last week said: “When businesses pay the Living Wage they have higher loyalty and commitment from staff, better productivity and lower staff turnover and HR costs,” he said.

And why not listen to someone who’s paying the real Living Wage and thriving. Here’s Andrew Fishwick again, from Sustainable Pub of the Year, The Truscott Arms, a independent business in north London: “It also makes economic sense. To recruit a single person can cost on average £3,000 with advertising the job, training etc. If you can keep hold of people longer you save money and one way of doing that is to pay them properly. Stop thinking about the impact of the initial cost. It makes absolute sense and we have benefited massively from that.”

Another leading figure in the pub sector Peter Borg-Neal has called on his counterparts to stop complaining about the changes and see them as an opportunity. The Oakman Inns Chief Executive said: “I can’t believe that people are still whinging about this. Certainly, it will be an own goal, in image terms, if the leisure sector moans about the initiative. We need to talk more about the positive points about working in our sector. From an Oakman Inns perspective we have already taken the decision to ensure that everyone who has been through the first few stages of our ‘Oakmanology’ training with us will be earning £7.85 per hour or more.”

And surely, if consumers said they’d be prepared to pay that little bit extra to cover the increased staff costs, wouldn’t that be a good incentive for businesses? Well, in a 2014 survey by Censuswide, 52% of shoppers were willing to pay higher prices if staff were paid the Living Wage; 61% would recognise the benefits in service from staff in pubs, restaurants and hotels if they were paid the Living Wage; and 4 in 10 would consider shopping elsewhere if their preferred store does not pay the Living Wage.

And an independent study examining the business benefits of implementing a Living Wage policy in London found that more than 80% of employers believe that the Living Wage had enhanced the quality of the work of their staff, while absenteeism had fallen by approximately 25%.

Certainly Oakman Inns and The Truscott Arms are thriving, while paying the Living Wage.

There’s an old phrase about knowing the cost of everything and the value of nothing. It could certainly have been written for this very topic. Employees are the lifeblood of a business. Value them and treat them well and the rewards will flow.

I’d love to hear what you think this will mean for your business and what steps you’re taking to ensure your staff get a fair deal. Do email us [email protected]


Share on facebook
Share on twitter
Share on linkedin
Share on email