I think most of us would agree that overall, the voluntary sector is not well paid. It was therefore refreshing to learn that a number of large funding organisations are now enabling charities to pay a proper living wage as a result of the Living Wage Friendly Funder scheme. Run by the Living Wage Foundation, these funders support charities to pay the living wage through their grant making. Of course this isn’t just a desirable aim, ideally it should be an accepted policy in any organisation that is seeking social change.
But there exists a degree of confusion about what we actually mean by the living wage. So what is it?
There are now, thanks to former chancellor George Osborne, two different living wages.
There is the living wage set independently, updated annually, and which takes account of the basic cost of living. This is promoted by the Living Wage Foundation and is currently £9.40 an hour for people in London and £8.25 for the rest of the UK. It is paid voluntarily by employers to workers aged 18 or over. Since the scheme started, some 2700 businesses and organisations have been accredited by the Foundation as living wage employers.
Then we have the government’s national living wage, first announced in the 2015 budget. This is set currently at £7.20 per hour by law, but only for those aged 25 or older and has no London weighting. It does not take account of the basic cost of living, instead being a percentage of median earnings; and of course doesn’t even apply to some 2 million young workers.
The Living Wage Friendly Funder scheme is concerned with the first of these. In other words, a voluntary and realistic living wage. But what are the benefits of this higher living wage to the voluntary sector? The Foundation says that those who pay the voluntary living wage benefit from reduced absenteeism, greater staff retention, and improved quality of work. Significantly for a voluntary sector organisation, it also helps to confirm a commitment to ethical values, and can raise the organisation’s profile among the wider public.
Of course all such schemes have their detractors. Indeed, the lower national living wage caused a stir when it was introduced, criticised by unions and activists as not going far enough; and by others as potentially damaging to jobs. In low paid sectors there have been reports of overtime and non-wage benefits being cut to help pay for the national living wage, while retailer John Lewis, who I understand pays above the national living wage, reportedly blamed its introduction as a reason for lower profits. But overall, the impact of George Osborne’s national living wage has not led to widespread job losses.
Wages are usually the biggest cost to an employer, but people are the most important investment in any organisation. Indeed, staff should not be seen as a financial drain, but as vital to the success of an organisation. Clearly, in Practice there are all sorts of pressures that impact on what you can afford to pay your staff, not least the restrictions imposed by funders on charities. But the Living Wage Friendly Funders scheme is an opportunity to overcome this particular pressure.
Looking forwards, motivated, engaged and productive staff are not just a product of good leadership, but also of fair reward. But while in some sectors we can rely on collective bargaining to set affordable wages, this is often not the case in the voluntary sector. Paying a realistic living wage, could therefore, be a step in the right direction for the lowest paid and for the sector as a whole.