Earlier this year, Brewdog announced that due to trading losses and financial instability, it will drop its real living wage pledge from April onwards. While many employers will have suffered similar financial difficulties as a result of the cost-of-living crisis, the business’ decision to pull out of the real living wage scheme has been met with substantial backlash given its previous dedication to the cause.
Although the real living wage remains a voluntary rate that employers can choose to pay, as set out by the Living Wage Foundation, many employers may be facing an increased pressure to opt in to this scheme to maintain both reputation and their existing workforce.
Even with the national living wage increases from April, the real living wage will provide workers in London with £3,334.50 more a year than the national living wage to reflect the increased costs of living. As the uplifted wage is calculated according to the basic cost of living in the UK, there is discussion on whether the national living wage is fit for purpose, and can provide a wage that can be sustainably lived upon, due to the undeniable discrepancy between the two rates.
Despite the debates surrounding the national living wage, employers which choose to opt into the real living wage may be viewed favourably by the court of public opinion given the emphasis on social responsibility in today’s climate. Those in the hospitality industry may be in a position to boost profits by opting in after diners in the capital voted that they would be more likely to choose a venue that pays their staff the real living wage over one that does not.
However, before pledging to pay the increased rate, employers should consider the subsequent impact that the real living wage will have on the pay structures within the business and how this will impact profit margins.
Large businesses may struggle to recruit staff in leadership positions or maintain morale in the workplace if the uplift in wages offered from promotions is insufficient for the increased duties required. Those which were previously relying on staff tips to boost profits will also need to consider the financial impact of the planned Employment (Allocation of Tips) Act 2023 legislation in force from 1 July 2024, which will prevent employers from withholding tips from employees.
As Brewdog’s actions have highlighted, employers will need to take careful steps to ensure they strike a fair balance between prioritising the financial success of the organisation and paying a fair wage to their staff to ensure they are being socially responsible.
Nick Hurley is partner and head of employment and Annie Green is a trainee solicitor in the employment team at Charles Russell Speechlys