Inflation may be at an all-time low right now, but millions of workers in the UK still struggle to pay the bills, the reason being that pay has been held tightly in check by a government austerity policy for more than five years, while inflation has been as high as 5.2% at times during the same period.
And the nature of the UK’s progressive tax system means that tax payments account for 47% of the income earned by the bottom 10% of workers. These are often the people earning the national minimum wage (NMW), and they are well represented on the staffing lists of catering and hospitality operators.
The latest figures from the Low Pay Commission show 1.4 million jobs in the UK are paid the NMW, with hospitality, retail and cleaning accounting for 53% of them.
The situation is well known, but what can be done about it? One innovative idea that has garnered some political support, notably from London Mayor Boris Johnson, is the idea of the ‘living wage’ (LW), which builds on the existing, legally binding NMW system. Under this, a UK adult worker (21 or over) must be paid £6.50 an hour; the rate drops to £5.13 for 18–20-year-olds, £3.79 for under 18s and £2.73 for apprentices.
The LW, meanwhile, is an hourly rate set independently and updated annually. It is calculated according to the basic cost of living in the UK, is implemented by employers on a voluntary basis and is currently set at £7.85.
There is a separate London LW to account for the very high cost of accommodation in the capital, which is currently £9.15.
The wage featured heavily as an issue in the run-up to the 2015 election, with all the major parties backing it and its benefits in some form.
The Conservative Party, which is now in a majority government, pledged a further rise in the NMW to £6.70 in the autumn and says it is on course to make it £8.00 by the end of the decade. The party also insisted that it would continue to support the principle of the LW and encourage businesses to pay it wherever possible.
The Scottish National Party, which took 56 out of 59 seats in Scotland, went into the 2015 election pledging to support targeted reductions to employers’ National Insurance contributions to support an extension of the LW. Workers in the Scottish Government already receive the LW, and the SNP is urging the government at Westminster to follow suit.
In its manifesto, Labour had pledged to offer tax rebates for businesses paying its employees the LW.
How has the idea been taken up in catering and hospitality? Sodexo recently announced it will pay the LW to all employees working in its head offices and is actively encouraging clients to do the same. Earlier this year, the services giant also launched its ‘Public Service Pledge’.
The pledge reads: “We know that paying the living wage improves quality of life. We pledge to implement the living wage for all our employees working in our head offices (in regions where formal rates are established); to wherever permitted submit a living wage alternative in all our bids; and to actively promote to our clients the adoptions of the living wage.”
The LW, however, is not universally welcome At the end of last year, Greater London Assembly member Tony Arbour warned that a compulsory LW could cost the hospitality sector £4 billion and threaten 210,000 jobs.
He said that small businesses and start-ups could be seriously hurt, or even put out of business, if such a measure came into force.
How does the catering sector assess the issue of The LW? To answer that, Cost Sector Catering asked a number of contract caterers across the country for their views. Just as in the world of politics, the issue divides the industry.
Many understand the benefits that the LW brings, with a higher quality of staff, improved staff retention and being seen as ‘leading the pack’ among the reasons for supporting it.
Dale Thompson, director of human resources of Vacherin, says: “We are completely behind the London living wage, and actively encourage our current clients and suppliers to take up this initiative. We always include the London living wage as a minimum when we tender for new business.
“If this element cannot be accepted at that stage, we work with the client to introduce it over a period of time.”
Ingrid Newbould, HR director of Bartlett Mitchell, adds: “Within contract catering, and particularly in the past year or so as the economy has been improving, many more clients have been discussing moving towards introducing the living wage as a minimum.
“That closely matches our own aims, and we’re very happy to work with them on introducing this. There does seem to be a swelling of support for this initiative as client organisations want to be seen to be doing the right thing for people working in or with organisations.”
John Durden, managing director of Fare of London, says: “The London living wage is something that Fare of London believes in and is working towards.
“Realistically, it can only be achieved when working in partnership with the client venue, and we are pleased that while renegotiating our existing contracts, we have been able to reflect these aims.
“We are trying to bridge the gap by giving above-inflationary pay increases over the next few years to those staff who currently earn less than the London living wage.”
Tony Carr, managing director of HCM Group, says: “Around the UK, we have increasing numbers of clients keen to adopt the living wage.
“It’s becoming a trend, and there are probably a couple of key reasons why – the economic outlook is much better and companies want to be seen as a socially responsible employer and client.
“Ultimately, it always comes down to what budgets can afford, but there is a definite aim with many clients to move towards living wage pay rates, and we’re very happy to work with them on this.”
Elior UK’s HR director, Arran McDowell, says that his company is also supportive of the initiative, as it is “good for business”.
“Our pay rates are locally driven and reflect the labour market in which each contract operates. Where possible, we ensure that our pay rates are in line with each client’s pay policy, and we review and agree these annually in partnership with our clients,” he says.
“Elior UK recognises that the living wage is good for business, good for individuals and good for society. We’re committed to working in partnership with our clients and offering the LW wherever possible.”
However, other caterers highlighted the difficulties in implementing such a scheme because of the way pay is structured in the contract catering sector, as John Herring, chairman of Connect Catering, points out: “From a contract caterers point of view, many of our contracts are ‘cost plus’ and, therefore, we have no control over wage levels. They are controlled by the client.
“Clearly, money matters, but being happy at work is paramount for the vast majority of caterers. At a global level, the factors to consider are: one person’s salary increase is another person’s inflation, the vast variations in the regional cost of living and the question of whether the living wage is the sense of a caring community.
“The focus for Connect is to negotiate the best pay we can for our employees but, equally, we believe in all the other motivational factors sometimes known as ‘hygiene factors’ – status, job security, salary, fringe benefits and work conditions.”
Kevin Watson, managing director of Amadeus, adds: “We would love to pay our employees the recommended living wage but, unfortunately, it throws up a minefield of challenges.
“For example, we have over 800 catering professionals working nationally across our venues, arenas and major events, so we’d have to implement different rates of pay across the country, which therefore impacts our HR resources and costs.
“Like the rest of the hospitality industry, our margins are very small, so we would either have to take a big hit on our profits or increase the cost for our customers. The idea of paying everyone a living wage is fantastic, but in the real, commercial world, it’s not that simple.
“Someone has to shoulder the cost, so the bigger question is who?”