Last week, there were two announcements made on low pay, firstly by the Living Wage Foundation and secondly, by the Scottish Government. Both mentioned a rise of 20p in the Living Wage, bringing it to its new level of £8.45 per hour. But isn’t the National Living Wage meant to be £7.20 per hour? If only it was that simple and if only more distinct terminology could have been used to describe all of these pay rates.
So, if you are a business owner or HR professional scratching your head about this in some confusion and wondering what if anything you need to do with your salary scales and pay rates, you are not alone.
Here is a brief summary of the current position in relation to UK and Scottish minimum pay rates:
Firstly, we have the National Living Wage (NLW). This is still set at £7.20 per hour (if the employee is aged 25 or over and not in the first year of an apprenticeship, otherwise National Minimum Wage age-related amounts still apply). This is still the legal requirement for all organisations across the UK, unless you are a Local or Scottish Government employer or potentially covered by their terms in your contracts work. More on these issues and rates later on.
Secondly, there is The Living Wage Foundation’s Living Wage. This was previously set at £8.25 per hour and has now increased to £8.45 per hour (£9.75 per hour in London). This is not a legal requirement, just a recommended level which firms can sign up to voluntarily and many have done so.
Thirdly, there is the Scottish Government’s Living Wage. This was previously set at £8.25 per hour and has now increased to £8.45 per hour. This is a requirement for all Scottish Government employees (and may therefore be required by bodies which are linked to them through contracts for services and in areas such as the care sector).
Fourthly, to date, there has also been another rate which was agreed with Scottish Local Authorities as they signed up to a 2 year pay deal which positioned them at the (previous) Scottish Government’s Living Wage rate plus 1%, of £8.33 per hour from April 2016 and entry jobs in this sector are still being advertised at this rate.
Whilst any increases to starting pay rates is to be applauded, it does present some interesting challenges for many firms in both understanding their legal obligations and determining the best way forward. Although within Local and Scottish Government workplaces there may have been a significant amount of communication and consultation about these increases taking place, for other workforces and indeed for many advisers, these very public rate changes and almost identical terminology has led to some understandable confusion and the impact on many workplaces of these changes has not been widely recognised.
Even if an organisation does not contract with the Scottish Government, the attraction of staff at entry grades can be a very pertinent issue. Why, for example, would an employee choose to be a private sector cleaner on £7.20 per hour if they could choose to be a cleaner within a Local Authority for £8.33 per hour?
Furthermore, if employers do look at adopting the higher starting pay rates, can they all afford to do so or will there be employee benefit or headcount casualties as a result? Moreover, what about the pay scales which have already been set? Many organisations now face differentials between roles being eroded and this can cause many to have to re-think their entire salary structure. We have come across many of these types of issues in our job evaluation and salary structure development work with clients in recent months and are on hand, should you require any guidance or support in this area. In any case, we will continue to provide newsletter updates in this area should there be any further changes, rate or terminology-wise (we hope) in the future.
If you have any questions on any of the issues raised in the above article, please contact Wendy Meiklejohn.