The Living Wage Pays (You back)

HR is, in essence, about helping employers get the most out of their employees – maximising their potential. We guide managers and business owners on the many facets of people management from compliance through organisational effectiveness through reward, learning, engagement and so on. Our goal is to help businesses become more profitable and to help not-for-profits and public bodies deliver better customer outcomes whilst being as efficient as they can be.

You may imagine that putting up business costs by lifting wages would not seem like the most obvious route to higher profit or efficiency or make you more competitive.

That is until you look at the Living Wage research out there. If you haven’t looked at the headline findings then have a quick look now but make sure you come back because I imagine you may have a few questions that I may be able to help with.

So, for the unconvinced amongst you let me share why I think this really is a sound business idea.

1. If your employees are not earning a living wage then they may be a little distracted.

This is a fairly straightforward one – if you are struggling to make ends meet for yourself or your family then it’s hardly surprising that you’re not always going to be on the ball when it comes to your work. Worry will be your principal issue. Worry that, despite the hours of effort that you are putting in, it still won’t be enough. And when you’re worrying about something you become distracted – your focus is elsewhere. You forget things, your work quality drops and so on.

Paying the living wage is not going to sort out all of their worries but it absolutely makes a difference. So if you want more focus and higher quality or increased sales, surely this small difference in pay is really worth it. Not convinced yet? You’d better read on.

2. Showing you care makes you and your business something your employees care about

It’s definitely in the realms of pub psychology, this one, but also far too easy to overlook. What we’re starting to talk about here is employee engagement – how much your employees will go the extra mile for you. This is where it really starts to get interesting.

Employee Engagement is all about how an employee feels about working for you. An engaged workforce will have very low absence rates, will be more productive, produce more great ideas, stay around longer and, generally, look after the business a lot better than a disengaged workforce.

So an organisation that clearly and openly demonstrates that they care by being an open advocate and supporter of the Living Wage campaign reaps many rewards far beyond the obvious and these are best explained by talking about your Employer Brand.

Employer brand is a recently developed concept but it’s fast proving to be as important as our more familiar understanding of brand. The Employer Brand is all about how attractive your organisation is to the people who work in it and the people who may want to work in it. Simply put, having a great employer brand means that it’s easier to recruit people, it’s easier to keep people and those same people want to keep doing their best for you.

In cost terms this translates to a number of significant benefits.

• Recruitment costs less or even nothing at all. With a great employer brand your potential recruits are far more likely to be looking for you, which means you don’t have to spend time and money looking for them. And when you do go looking a great employer brand means that you go the head of the queue in competition for the same talent. What’s more is that they are more likely to come with a passion for what your organisation is all about.

• Greater, long-term loyalty amongst your existing employees means that you won’t have to recruit so often. Just think, you’re not just paying less to recruit people, you’re also doing it less often and you don’t have keep spending money on training new people to be as good as the people you’ve lost.

• Finally, more passionate and caring people means higher productivity, more commitment, more ideas, just about more of all of everything good you look for in a workforce which, to your bottom line, means far greater value for the money you do pay out in wages.

So let’s just look at that again:

BETTER EMPLOYER BRAND = LOWER RECRUITMENT COSTS + LOWER TRAINING COSTS + MORE PRODUCTIVE, HIGHER VALUE EMPLOYEES

And there’s more! You may or may not have noticed this but customers are becoming a lot more choosy these days about where they go for their products and services. There is an increasingly significant movement towards organisations that take a more responsible approach towards their environmental and social obligations. More and more customers when given a choice between a company that visibly does good against one that doesn’t will go with the one that does. Think Starbucks as a great recent example of this.

And did I mention shareholders too. If these are important to you then think twice about this. Shareholders care about returns, that is true, but companies that care, that put greater onus on a more thoughtful and sustainable business model also happen to be the ones that perform the best on the stock markets. Current thinking is suggesting that this is because greater awareness of the world is synonymous with better management – the two go hand in hand.

Better returns, more customers, more investment, better returns.

In other words, the return that you make on your investment in a Living Wage will outstrip that investment.

Let’s be clear about this. I’m not saying that by simply adopting the Living Wage you will fix all of your employee issues and I’m not saying that paying the living wage will automatically make you the best employer in town. But I am saying that by taking this first step – by showing how much you do care about the lives of your people beyond their working hours you will start to reap rewards that exceed your initial investment.

There is another angle to this that is far more important than maximising profit or efficiency in any organisation will ever be. Our businesses do not exist in little microcosms with sets of priorities completely alien to that of the wider world around them.

Our businesses have vitally important roles to play in providing value to customers, through the products and services they deliver, their suppliers, through the goods and services that they may require from them, their employees, through the meaning that work can provide to people’s daily lives and the pay that they offer in return, and the communities from which they draw their employees and share their environment. Businesses support society and, just as importantly, are supported by society.

Businesses therefore can and should be conscious about the contribution that they make to the societies in which they exist. Any self-respecting, conscious business with a good eye on the future would not want to harm the society that ultimately supports it.