Understandably, there are concerns in the hospitality industry over the government’s introduction of a statutory minimum national living wage, as this sector accounts for a large proportion of people currently earning the minimum wage.
In the short term many in the sector will see their payroll costs rise. Similar concerns were expressed when the National Minimum Wage was first introduced in 1999, with some businesses feeling that they wouldn’t be able to manage the wage increase.
The new wage increase will affect all workers over 25. Effectively replacing current minimum wage rates, it will start at £7.20 an hour from April 2016 and is set to rise to £9.00 by 2020. It will give an estimated 2.5 million people an average £5,000 rise over five years. Those under 25 will not be affected by the wage increases.
Although some businesses are apprehensive about the new rate and its impact on their bottom line, there is ample evidence to suggest clear benefits, from higher staff retention rates and higher productivity. The extra costs of pay rises can be mitigated through contract efficiencies, smarter operating practices, and the improved retention and commitment of staff who are fairly remunerated for their work.
Paying a fair wage can go hand-in-hand with growth at a time when the number of staycations in the UK has increased and the sector has not suffered with under-occupancy. Uncertainty amongst employers about the implications of wage increases hasn’t stopped over 2,000 organisations taking fair wages a step further, by becoming accredited as Living Wage employers. This voluntary scheme, organised by the Living Wage Foundation, campaigns for the Living Wage, which is calculated according to the amount a worker needs to earn to lead a decent life and cover the basic costs of living.
The Living Wage Foundation recently announced its new Living Wage rates for London and the UK, which are significantly higher than the current national minimum wage of £6.70. Accredited Living Wage employers will now pay their staff a minimum of £8.25 an hour, rising from the previous rate of £7.25 an hour. The London Living Wage, a separate rate weighted for those working in the capital, has risen by 25p to £9.40 an hour. This reflects the inherent additional costs associated with living and working in London.
Some advantages of a fairer wage
Direct financial cost to the business is undeniable but financial savings can be realised through reduced staff turnover; increased worker morale and loyalty; reduced absenteeism; productivity improvements; and strengthened recruitment opportunities. This will also have an impact on standards which are critical in the hotel sector to enhance the consumer experience and ensure customers receive the very best service.
Offering the Living Wage can also help your business’s brand perception, letting customer and suppliers know that they are dealing with an ethical company.
A 2012 study – commissioned by charitable organisation, Trust for London from Queen Mary, University of London – found that the impact of organisations moving to the London Living Wage resulted in a 25% reduction in staff turnover on average; while organisations also reported positive reputational impacts, aiding their ability to recruit staff and (in one response) helping to win business. Additionally, following the introduction of the London Living Wage by their employers, over half of the workers surveyed (54%) felt more positive about their employment, 52% felt more loyal towards their employer, and 17% indicated that their work was more productive.
It was noted that as the changes will put more money into the pockets of consumers, businesses may well see their profits go up. In their study, almost 4 in 10 (38%) workers reported financial benefits such as being able to buy more goods and services and save more. This is great news for the hospitality and leisure sector in particular.
My own organisation is a Living Wage Recognised Service Provider, which has committed to paying the London Living Wage to all our direct employees, as well as actively encouraging all clients to adopt this rate for the cleaners on their contracts.
There is undoubtedly a financial cost in implementing the Living Wage but this can be more than offset by the benefits it will provide your business.
About the author
David Punter is the business development director at London specialists in quality cleaning, Julius Rutherfoord. In this piece he outlines the benefits of wage increases in the hotel sector.