A newspaper investigation has criticised retailers for not guaranteeing to pay their staff the living wage. But should retailers be feeling guilty?
An investigation by The Independent found that no big retailers had committed to the living wage, which is set at the hourly rate of £9.15 in London and £7.85 outside of the capital, while other big businesses had, including Barclays, Aviva, KPMG and Chelsea FC. However these companies are unlikely to employ the scale of lower paid workers that retailers do, so are arguably less affected.
The living wage is set independently every year by the Living Wage Foundation and is calculated according to the cost of living.
The newspaper report came as it was revealed today that the national minimum wage is set to increase by 20p an hour to £6.70. The hourly rate for 18-20 year-olds will rise from £51.13 to £5.30 per hour and by 8p to £3.87 for 16 and 17-year-olds.
Prime Minister David Cameron said: “At the heart of our long-term economic plan for Britain is a simple idea – that those who put in, should get out, that hard work is really rewarded, that the benefits of recovery are truly national.”
While the minimum wage will help thousands of those on the lowest pay, campaign group Citizens UK is calling for businesses to raise their base rates further to “provide their family with the essentials of life”.
Some retailers such as Halfords boss Matt Davies - soon to take the helm at Tesco’s UK business - are engaged in the debate. In November Davies called the idea of paying a living wage “incredibly fair”. He said by March 2016 80% of Halfords store staff will be paid 50p above the minimum wage, compared with 50% this month.
But for many retailers the living wage isn’t even on their radar.
Take French Connection. Asked on his thoughts on the living wage debate on a results call this morning, chief operating officer Neil Williams told Retail Week that the living wage was “not on the agenda” for the high street chain. “I’m sure it’s something we will look at…it’s not on the list of high priorities,” he said.
Most retailers have stuck to their guns in refusing to pay the living wage. Why - is it simply a case of preserving profits?
BRC external affairs advisor Jonathan Rowe says there’s no collective reason why retailers have not signed up. “Retailers decide this on an individual basis. There’s no overarching reason why they haven’t signed up.”
Home Retail chairman John Coombe was more forthcoming. In a survery, reported by Retail Week on Monday, he said he sympathised with the concerns over the “inadequacies of the minimum wage” but said being forced to pay the living wage would impact Home Retail’s business and its job creation.
“We are a retailer, competing in the digital world, employing around 50,000 people, many of whom are on the minimum wage. If the ‘living wage’ becomes the minimum wage, this will put pressure on margins and thus on our ability to create entry level opportunities with great prospects in our company,” Coombe said.
Rowe says the focus should be on the level of investment retailers plough into developing their staff and the layers of benefits they offer.
“They invest in their people with things like skills development. Name me another industry where people can start at the bottom and reach the boardroom,” says Rowe. “It’s almost unheard of in any other industry. The retail industry is based on meritocracy. We don’t believe that hourly pay is of sustainable benefit; we’re not convinced that a simple adjustment [meeting the living wage] is the way to create a sustainable solution.”
Mike Coupe, chief executive of Sainsbury’s, which offers a base rate of £7.08, this morning defended the supermarket’s decision not to pay the living wage, saying the campaign didn’t account for the range of benefits staff receive.
“The challenge around the living wage, whilst it’s a very important aspiration, is that it is a single headline number which doesn’t take into account the other benefits that we offer our colleagues – whether it’s a discount card, whether it’s pay breaks, whether it’s a bonus, whether it’s a pension contribution,” says Coupe. “If the focus is on just a single headline rate, then we don’t believe that is particularly helpful. I think we have to judge ourselves – we do judge ourselves – against the minimum wage and actually our differential relative to the minimum wage has increased pretty significantly over the last four or five years.”
Rowe says the aim was for people in the retail industry to be able to quickly progress within retailers, with wages increasing as they do. He says he didn’t want staff to be paid a basic salary and “stay and languish on that”. He said the BRC is investigating the barriers to progressing within retailers.
So how can retailers who aren’t paying the living wage defend themselves when they’re faced with such scrutiny?
“When retailers are challenged with stuff like that then they should talk about their investment in people,” says Rowe. “The hourly pay is a very small proportion of the total amount retailers spend and invest in people. Think about the cost of skills training, think about the benefits such as staff discount, holiday pay, pension contributions, that are offered when you join a retailer. All these things are part of the retail investment. Hourly pay takes no notice of any of that. Pay could be raised few pence not going to make the impact all other things will.”