Why your business should pay above the minimum wage

Why businesses need to recognize that the minimum wage is no longer a sufficient amount for employees to live on

The minimum wage does exactly what it says on the tin - it is the bare minimum that you are legally allowed to pay an individual in your country.

Here in the UK, the Living Wage Foundation has calculated the living wage to reflect the

basic cost of living

in this country. This is the threshold at which people can afford to have a decent quality of life.

They currently calculate the UK living wage to be £7.85 and the London Living Wage to be £9.15 (which reflects the higher cost of living in the capital.)

At the time of writing this article, the minimum wage in £6.50 an hour, which is clearly well below the living wage threshold.

I personally have had several jobs at the minimum wage and can attest to the fact that it is simply not enough to to make a life with. I could just about afford rent in shared accommodation and food costs, but at the end of the month, there was nothing left. There was nothing to put into an emergency savings account, no disposable income and large purchases were completely out of the question.

I fully understand that for many businesses, staff costs are among their highest outlays, therefore any increase to this will have an effect on profits.

However, I hope I can emphasize in the following paragraphs the benefits to increasing staff wages and the positive effects it can have on your business, and even your profitability!

It must be noted that you could consider working towards a phased pay increase with the living wage as an eventual goal, this planned approach will help manage and plan for the cost implication of increasing wages.

Here is my argument for paying above the minimum wage:

1. You want motivated, engaged and enthusiastic employees

All businesses want dedicated and motivated staff members, however it's not hard to understand this dedication waning when you are paid a wage upon which you can not found a life.

It's pretty hard to stay focused on your job when you are worrying about whether you will be able to pay your rent next month, afford childcare costs, fix the car or even afford to eat.

Removing this strain on your people can have a profound affect on morale and productivity, as raising living standards helps to remove sources of stress and anxiety.

It's also worth thinking about the message you are sending to employees by paying the minimum wage.

I have always felt that it goes something like this "I place the minimum possible value on your job role and it's contribution to this company."

Am I going to want to go the extra mile and stay with a company which is sending me this message? No. Damn. Way.

Staff turnover is highest in the service industry, which incidentally is also one of the industries most likely to pay the minimum wage.

This turnover is extremely unproductive, as there is a significant cost involved in constantly re-hiring and training new staff members. It's also important to consider that every time someone leaves, they often leave behind a skills and/or knowledge gap which can cost you precious time and resources to fill.

"An independent study examining the business benefits of implementing a Living Wage policy in London found that more than 80% of employers believe that the Living Wage had enhanced the quality of the work of their staff, while absenteeism had fallen by approximately 25%." Source - www.thelivingwage.org/whatlivingwage

2. You are helping to stimulate the economy by creating disposable income

As I have outlined above, those on the minimum wage are struggling to participate in our economy, even at a basic subsistence level.

All business relies on generating wealth, however it also relies on the redistribution of wealth to customers, who then in turn have the available resources to buy services and products.

By paying a wage at which your employees have a disposable income, you are helping to generate a well lubricated economy, an economy in which your business can thrive.

Even if you are selling to businesses, it is certain that somewhere along the chain, somebody supplies something to an end customer. This end customer needs to be able to buy whatever this for the flow of resources through the supply chain to continue.

All businesses benefit from redistributed wealth and from consumers who are able to spend.

3. You are helping to end a cycle of poverty

Beyond the benefits to your individual organisation and the economy, paying above the minimum wage also has a positive effect on our society as a whole.

My personal experience of trying to live on the minimum wage made it abundantly clear that if I were to stay at that level, I would be trapped into a cycle of poverty - drawn into borrowing to cover costs and accumulating debt that could never be paid.

I recently attended a talk by Sir Stuart Rose, former chairman of M&S, who outlined the benefits of sustainable business practices. He made the compelling point that it is no longer just up to the state to solve social problems, businesses also need to play an active role.

Businesses are born and survive through innovation - we are ready and quick to adapt to changing situations and are adept at solving complex problems. Our strengths have applications beyond the our own business borders - we have the skills and expertise needed to address some of the biggest problems facing the world - poverty, environmental issues and food security, to name a few.

We can and should use our knowledge to help bring about positive change - helping lift people out of poverty by improving wage conditions is a relatively simple place to start.

I agree with the governments statement "we need to make work pay" - however this should be done with the carrot of sustainable wages, not the stick of benefit reductions.

Want to tell me your thoughts on paying above the minimum wage?

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