Making a margin: a contractors blog
Is client reluctance to pay above the NLW a sector – specific issue?
The national living wage (NLW) Space was announced in the 2015 budget (for implementation in 2016). The governments declared intent was that by April 2020 it would reach £9.35 per hour, i.e. 60% of the median wage for over – 25’s. That meant a 7.5% annual increase over four years.
With this first year’s annual increase being only 4.1% to £7.50, that target looks out site already. It will now take an annual increase of 8% over three years to make it happen.
Yes, unbelievably so. However, why is it so much of a struggle to maintain the most basic of pay standards in the UK?
I think the problem is to a large extent sector specific.
When the low page commission worked with the government to set the old national minimum wage and more recently NLW, one of their considerations was that it shouldn’t harm employers.
It also identified that certain sectors were more likely to be a risk than others:
- social care
Of course it is not just cleaning staff in the sectors who are subjected to the NLW, but realistically if, as an employer, you are paying core delivery staff the minimum, then there’s no way you’re going to pay your contracted cleaning staff anymore, especially if your profit margin is genuinely under pressure.
Unfortunately, that does not help cleaning contractors when it comes to recruiting and retaining staff in these sectors. As a company, we have clients to won’t pay more than in LW for this very reason and we are constantly working on ways to keep staff motivated. The irony is that the cleaning jobs themselves are usually more demanding than regular office cleaning– night shifts, challenging environments – and require staff that are physically fit and willing to graft. Inevitably, however, staff won’t take much persuading to move to another role paying 50p more if they can get one. That means higher cost to us in recruiting and training and, sad to say, higher likelihood of service issues if a member of staff walks out without notice.
It all comes back to the fundamental argument.
You get what you pay for and if you pay people what they are worth, in other words, closer to the LWF minimum, then as a client you will see a return in terms of consistency, reliability, and continuity.
Along with 3300 other companies in the UK, we are now accredited living wage employer. There is no doubt this stiffens our resolve when it comes to negotiating new business and when we do hold annual reviews with clients in the Low Paid sectors, it at least means we are talking from a position of strength.
Joint Managing Director of so clean cleaning and support services, reports.