Recently it has been reported that the increase of the higher minimum wage (new living wage) to £7.20 per hour is sending ‘shockwaves’ through the labour market (The Guardian).
This report sites an economic scare of more poorly administered and ill-intentioned zero hours contracts being put in place or that businesses will jeopardise growth by scaling back recruitment. Perhaps we should look at this differently.
Over recent years many in the labour market have talked about the widening gap between employees and management wages, and rising profitability of companies without the benefit being felt by dedicated employees on the front line.
The Guardian reports on two businesses who have calculated the impact of the minimum wage on their profitability:
Support services firm Interserve recently announced that the extra annual wage bill for its 15,000 cleaners could amount to £15m, or 12% of its annual profits.
Mears Group estimated the cost of meeting the wage rises for its 4,000 care workers would be £5m, or 10% of its annual profits. “Faced with a wage bill of this size, some employers are thinking twice about taking on new workers.”
Rather than state the increase to the new living wage as damaging to business, perhaps this should be viewed as profit sharing but in a structured PAYE format? We have to remember that if people have more money in their pocket they spend this in the economy and therefore businesses are supported. Negative perceptions in the UK against businesses using low cost workers or off-shoring overseas can have a significant impact on the perception of the business brand.
Personally I support the new living wage levels and believe that impacts on profits up to 10% are acceptable. This is about a caring and sharing business community addressing the previously widening wage gap in the UK.
At Fortalis we provide business services working with self-employed professionals who earn significantly more NOW per hour than the Living Wage is scheduled to be in 2020! We do this because we believe in paying for higher quality professional Agents to deliver our services.
Our business model is set-up to provide truly flexible and scalable resources to our clients to meet their business needs by using Homeworkers and reducing our overheads by more than 30% from a traditional contact/service centre.
If as a business, your profitability model cannot sustain the new living wage you should look at your operating model. Consider outsourcing to businesses like Fortalis where we can ensure you more than meet the living wage requirements, AND have a customer service partner that meets all your business needs in a flexible and sustainable way.
To find out more about this win-win situation, call Fortalis on +44 2380 982010.
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