Why the Real Living Wage Matters for Workers and Businesses
The Real Living Wage movement has been gaining traction around the world, as workers and advocates call for fair pay that reflects the true cost of living. In this article, we'll explore why the Real Living Wage matters for workers and businesses, and how companies can benefit from paying fair wages.
What is the difference between the National Minimum Wage (NMW), National Living Wage (NLW) and Real Living Wage (RLW)?
National Minimum Wage (NMW)
The minimum pay per hour most workers under the age of 25 are entitled to by law. It is dependent on your age and whether you’re an apprentice and is set annually by the Government, based on recommendations by the Low Pay Commission. The NMW is applicable to every person over school leaving age, regardless of their position in the company, but excludes those that are self employed, company directors and voluntary workers.
National Living Wage (NLW)
The minimum pay per hour most workers aged 25 and over are entitled to by law.
Real Living Wage (RLW)
An hourly rate based on the basic cost of living in the UK. It’s calculated by the Living Wage Foundation, a campaigning organisation in the UK, and therefore has no legal grounding.
The NLW is calculated by the Government based on a proportion of the median level of earnings, whereas the Living Wage is calculated independently of Government and is based on the amount people actually need to get by. Since the NLW is based on earnings, it’s not surprising that the NLW is lower than the Living Wage and a less realistic calculation of how much a worker needs to earn in order to meet the basic cost of living, such as rent, food, and utility bills.
What challenges might workers face if they’re paid less than the RLW?
If employees are paid less than the Real Living Wage, they might struggle with financial insecurity and independent living. This could impact on several aspect of their lives such as:
- Physical Health - poor nutrition and inability to afford medications
- Mental Health - feel devalued, stressed and anxious
- Ability to cover basic expenses - cannot afford essentials such as water, heating & electric bills
- Housing condition - struggling to pay rent/ maintain property
- Incentive to work - less desire to get and retain employment
- Performance at work - less desire to work effectively and efficiently
- Culture of discrimination - often it is minority groups in unfairly paid roles
What is the positive impact of paying employees a Real Living Wage?
Paying employees, at the minimum, a RLW has proven to have a significant positive impact on workers’ lives in many aspects. For example:
- Money for both necessities & social activities - reassurance to buy things they need and flexibility to treat themselves occasionally
- Ability to save - provides security for the future and ability to get onto the property market
- Improved physical health - can afford a balanced diet and active lifestyle
- Improved mental health - feel more valued and less stressed
- Higher morale & motivation at work - feel more valued in the workplace and more respect for employer
- Supports equality - ensures everyone has access to the same opportunities and rights
What are the benefits of paying the RLW for businesses?
There is an increasing amount of evidence that suggests that paying the Real Living Wage has benefits to employers as well as their employees, this includes productivity at work, worker’s retention, increased social responsibility and much more. The Living Wage Organisation surveyed their business network and found that 93% of its businesses had benefited since being accredited through increased motivation of workers improving relationships within the workplace and improved reputation of the business.
The Living Wage Dividend report shows how businesses that pay their employees the Real Living Wage as a minimum are having a greater social impact and contributing to the economy and resilience of local communities. Companies paying their workers properly and in-light with their companies core values proved to be higher regarded as a reputable business than those of which did not. This helps to secure high-quality job applicants, retain employees and gain funding and investment for business growth. Finally, those employees that receive the RLW show improved mental and physical well-being, which consequently had an impact on performance at work, willingness to learn and the overall productivity and scalability of the business.
What companies have successfully implemented this policy?
There are over 12,000 accredited employers in our network, going further than the government minimum and paying all staff the real Living Wage for the real cost of living. Some of these businesses include incredibly successful and renowned businesses like Ikea, BrewDog, Oxfam and Nestle.
This is a long-term investment in our people based on our values and our belief that a team with good compensation and working conditions is in a position to provide a great experience to our customers — Ikea
How can companies support the Real Living Wage Movement?
There are many ways that businesses can help support the RLW movement and work towards establishing a fairer and more even economic climate across their employment structure. This includes, but is not limited to:
- Researching the living wage rates within their area to find out the average costs employees would need to be paid to cover expenses
- Conducting a cost-benefit analysis would allow businesses to establish what the initial cost of implementing such a campaign would be against the long-term benefits that the companies would reap
- Engaging with both stakeholders and the wider community by publicly committing and championing the RLW movement could help others in their industry to follow suit
- Supporting and partnering with other companies that pay fair wages and advocating for policy changes that promote economic justice
- Becoming Accredited as a ‘Living Wage Employer’ and sharing your experience
What are we doing?
At Versantus, we’ve committed to the real living wage for all our employees. We strongly believe it's an investment in our people that pays for itself, whilst also benefiting our surrounding community.
The Bottom Line
The Real Living Wage movement is an important step towards creating a fairer, more just society where everyone has access to a decent standard of living. By paying fair wages, companies can not only improve the lives of their employees, but also benefit from increased productivity, loyalty, and customer satisfaction. Let's work together to create a world where the Real Living Wage is the norm, not the exception.