The London Living Wage

Dear LinkedIn Community,

As we enter a new year, with it comes the possibility of significant changes in the field of wages. Recent developments have resulted in a ten percent increase for the years 2023–24 for the London Living Wage, which is intended to be reflective of the actual cost of living. Despite the fact that this is a commendable step toward fair pay, it also brings up important considerations for employers, procurers, and particular industries.

A brief overview

The LLW goes beyond the statutory minimum wage, aiming to provide workers with a decent standard of living. It considers essential expenses such as housing, food, and transport. In the UK, the real living wage has risen to ￡12.00 per hour outside London and ￡13.15 per hour within the capital.

The cleaning market

Around 1.47 million people are employed in the cleaning industry in the United Kingdom, which also makes a significant contribution to the economy of the country. The sector is facing challenges such as rising energy costs and severe staff shortages, despite the fact that it has experienced growth from one year to the next. In the year 2024, the average hourly rate for cleaners operatives will be ￡10.21, which is lower than the current living wage of ￡10.42, to be exact. The vast majority of cleaning companies are relatively modest in size, with nine out of ten employing fewer than ten people.

Impact on employers

When an employer decides to implement the Living Wage, they will be subject to a wage bill increase of ten percent. In spite of the fact that this demonstrates a commitment to equitable pay, it also adds an additional financial burden. The current state of the economy, which includes the micro-recession, has made it difficult for businesses to carry out their operations. It is now necessary for employers to deal with increased labour costs in addition to other expenses. In order to ensure that the new rates are implemented in a timely manner, employers are required to promptly communicate them to their staff. The real living wage, in contrast to the statutory minimum wage, is applicable to all individuals who are at least 18 years old.

Impact on procurers

When working with suppliers and contractors, procurement professionals are required to evaluate the impact of the increase in the living wage. Pricing strategies, contracts, and overall procurement strategies could all be impacted as a result. While it is commendable to advocate for fair wages, it is imperative that procurers strike a balance between this and cost management. Dealing with contracts that are in accordance with the living wage can be a difficult process. By collaborating with employers who pay a living wage, procurement professionals have the opportunity to advance ethical business practices. It is important to note that this should be done without jeopardising the viability of the business.

What lies ahead?

If another 10% increase is added this year, it could exacerbate existing pressures.

Employers in the cleaning industry may struggle to absorb higher labour costs.

Procurers may need to reevaluate contracts and pricing structures.

The debate should focus on finding a balance between fair wages and sustainability in a challenging market.

Let’s engage in a constructive dialogue, recognising that the Living Wage is a positive step while also acknowledging the practical challenges it poses. Together, we can foster fair pay without undermining business viability.