TheBusinessDesk.com supplemenT | noRTh WesT | mARch 2016

liVinGWAGEIs it good for business?

in association with

FeaturingWhat’s it all about? 4

Apprenticeships and fair pay. 8

Round table discussion. 13

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Supplement March 2016

Stating the case

2Editor ForEWord

contentssponsor foreword: clarifying the living Wage confusion. Mike Brogan, chief executive, Procure Plus; nurturing young talent. Paul Shannon, chief operating officer, ANS. 3 ➔

What’s it all about? Getting to grips with the differences between the minimum wage, the national living wage and the living wage as defined by the Living Wage Foundation.

4 ➔

case study: high Access. Manchester-headquartered High Access has been accredited as a living wage employer by the Living Wage Foundation. 6 ➔

Apprenticeships and fair pay. While fully trained adults stand to gain from the introduction of the national living wage in April the situation for young

apprentices is less joyous. 8 ➔

The apprenticeship levy. A significant factor in the apprenticeships equation is the introduction by the Government of the apprenticeship levy in April 2017. 10 ➔

in-work poverty on the rise. Concern for young people has been highlighted in a study for the Joseph rowntree Foundation. 11 ➔

squeeze until the pips squeak? Businesses from a diverse range of sectors came together to discuss the Living Wage campaign’s real living wage, the introduction of the

Government’s living wage in April and what both will mean for their businesses. 13 ➔

siNCE the Chancellor’s 2015 Autumn Statement rebranded

the national minimum wage as the living wage – effective from April 1 – there has been some confusion amongst employees and employers alike.

in this supplement we unravel that ambiguity and also ask a range of businesses from different sectors what it means for them.

A recent survey by Kronos asked 2,000 people their views on the Government’s living wage. it shows that 71% of people asked about its impact stated that despite exclusively targeting employees over the age of 25, organisations will be forced to raise wages for all members of staff.

Can all businesses manage the burden of increased costs – and do the long term benefits out way the short term pain of readjustment?

With the new legislation potentially adding £11bn to the national wage bill from April, improving productivity will be critical to counterbalancing this cost.

Productivity was very much on the minds of those businesses at the round table discussion on the topic, covered in these pages.

For some sectors productivity improvements can be achieved, but for others with already tight margins, particularly in the service and leisure sector, finding new ways to further increase efficiency will be a tough ask.

We would like to thank the sponsors of this supplement – ANS and Procure Plus – for supporting a frank and open discussion on the pros and cons of better paying your workforce.

Both businesses choose to pay the Living Wage Foundation’s ‘real’ living wage, which is over and above the Government’s new compulsory standard for over 25s, and both are firmly in the ‘pro’ camp. But they also accept that what works for their own businesses may not work for those across all sectors and that debate on the topic is healthy.

That’s what we’ve aimed to do within this supplement: to clearly explain the Government’s changes, to distinguish between that and the Foundation’s living wage, to consider the issue of apprenticeship pay and to debate the concerns many businesses have around the topic.

We hope you find it informative.

Joanne Birtwistle, editor, TheBusinessDesk.com

Portland tower, 53 Portland Street, Manchester M1 3LF. tel: 0161 238 4922Commercial director: Lee-J Walker leej.walker@thebusinessdesk.comEditor: Joanne Birtwistle joanne.birtwistle@thebusinessdesk.comContributor: Nick Jackson nick.jackson@thebusinessdesk.com

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our commitment, in the same way that our team commit to the business and our customers each and every day, by ensuring a wage that supports the cost of living.

Converged infrastructure technology, Cloud and the industry as a whole is in a constant state of flux and the only way to keep ahead in technology is to continue to nurture, young talent and develop their skills in order to create the next generation of digital leaders.

innovation through technology: rAPid Private Cloud infrastructure from ANS utilises the number one integrated infrastructure from Cisco and NetApp – FlexPod. rAPid is pre-tested, pre-assembled and pre-validated and arrives at customer site from point of order within 28 days, allowing customers to innovate and operate better, faster. At ANS we believe it’s time to stop building a private cloud and start buying one.

is why forcing it upon businesses could cause job insecurity for a lot of people. on the other hand, the voluntary, official Living Wage represents much more than just paying the legal minimum – paying a fair wage that employees can live on because those signing up to pay it believe it is the right thing to do.

Businesses of all sizes will need to fully consider their ability to pay the Government’s National Living Wage, and make plans for its implementation. We would urge those that can to consider becoming accredited Living Wage employers, paying the official Living Wage, so they can experience the benefits of paying their staff a fair day’s wage for a fair day’s work.

Land of opportunity3 Sponsor forewords

tHE Chancellor’s announcement of a new national minimum wage rate for the over 25s, as part of the 2015 Autumn Statement, took many by surprise. But by naming it the ‘National Living

Wage’, the rate became easily confused with the official Living Wage – a voluntary, higher rate of pay calculated in line with the cost of living.

to clarify, the Government’s National Living Wage is calculated by the Low Pay Commission, based on what the market can bear, and does not have a London weighting. A company failing to pay it to employees over the age of 25 is breaking the law. The official Living Wage is calculated for the Living Wage

Foundation by the Centre for research in Social Policy at Loughborough University to reflect the cost of living, with a London weighting calculated by the Greater London Authority. Employers pay this voluntarily – in the process, becoming an accredited Living Wage Employer.

Procure Plus is a committed Living Wage Employer, accredited by the Living Wage Foundation, and we have worked with our suppliers and framework partners to also pay the official Living Wage. The benefits we find of paying this higher rate are clear in terms of productivity, staff retention and social responsibility.

However, not every company can commit to paying the official Living Wage, or even the Government’s lower mandatory National Living Wage, without having to make serious cutbacks on their services or staff. This

At ANS we’ve always championed apprenticeships and are leading the way in nurturing young talent. We believe that the technology sector has the opportunity to set the precedent for apprenticeships, given that the UK’s

digital industry may face serious problems because of a future skill deficit. The ANS Academy was founded in 2013 and provides real jobs for up to 20 apprentices per year, with industry leading training and hands-on experience within ANS.

The Academy provides rapid progression into the world of private cloud. our apprentices get to grips with next generation technology, training in a hub environment and working on “break and mend” environments to fix critical issues. We’ve found that

this practical approach offers our apprentices an effective, dynamic learning environment.

After successful completion of the scheme, every apprentice is fast tracked into full time employment within ANS. Historically, we have made a commitment to pay above the National Minimum wage amount so when the Living Wage rate was announced in July, we were eager to gain the accreditation.

We aim to be a company of firsts and champion innovation so we made it our mission to be the first Manchester based Managed Service provider to become a Living Wage employer.

We recognise that every employee from apprentice to account manager, forms an integral part of not only our company, but of our culture. Each individual’s contribution is valued and it’s therefore only right that we show

Clarifying the Living Wage confusion

Nurturing young talent

mike Broganchief executive, Procure Plus

paul shannonchief operating officer, ANS

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Let’s start with the highest rate first. This is the Living Wage Foundation’s rate, which is £8.25 per hour for an employee not undertaking training.

it should be emphasised that these rates are not compulsory. The Living Wage Foundation (LWF) invites companies to become “accredited volunteers” which then obliges them to pay those rates.

The foundation says that its aspirational rate is based on research on how much

the cost of living really is.

The water has been somewhat muddied by the Government’s rebranding of the current minimum wage as the national living wage for workers above the age of 25, from April 1, 2016.

The crux of the issue is the difference between the eventual bottom rate for an adult of the Government’s compulsory £7.20 and LWF’s voluntary £8.25.

According to LWF, the Government rate set by Chancellor George osborne is a figure not based on any cost of living research, but what he thinks companies should be able to afford to pay.

anyway? Because the Government rate is a phoney living wage.

“it has stuck the ‘living wage’ label on the new national minimum wage

THE average person in the street would probably struggle to explain the three concepts, or indeed what exact levels they

are actually set at.

4➔

Getting to grips with the differences between the minimum wage, the national living wage and the living wage as defined by the Living Wage Foundation.

What’s it all about?

➔

Ann-marie englishsenior regeneration manager, Procure Plus

LWF’s view is backed up by the giant public service union Unison which has said in a statement: “What’s the point in campaigning for a living wage, the Government has announced it’s coming

‘What’s the point in campaigning for a living wage, the Government has announced

it’s coming anyway?’

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of £7.20 an hour and that will become law for workers aged 25 and over from next April.

“The new minimum wage is good news for millions of low-paid workers, but it’s not a living wage.”

Manchester-based social housing regeneration contractor Procure Plus has adopted the higher rate and contractors working with Procure Plus are also encouraged to pay the rates.

Procure Plus senior regeneration manager Ann-Marie English is also the LWF’s North West Champion.

She said: “We decided some time ago we wanted to pay the living wage. We were one of the first organisations to join the foundation.

“We’re trying to get disadvantaged people back into employment. A lot of people we wanted to apply for jobs within our organisations couldn’t at such a low wage. it was a massive off-put for someone living third generation on benefits.

“We consulted with our supply chain and told them there was a barrier to overcome and we wanted to do something about it. Nearly all agreed it was the right thing to do.

“in many cases, these workers are the only people earning in the family. to help our supply chain make the decision to pay the living wage we did the same.”

English said she met with some opposition from companies but found an interesting way of bringing them round to the Procure Plus way of thinking.

She explained: “i said to them: ‘Pay your workers what you’re paying them now, but run a dummy living wage bill alongside the real one’.

“When they did this, they realised the difference between the two amounts was negligible. They also realised they are more likely to get people who will be motivated to do a good job.”

tom Skinner is the co-ordinator of the LWF’s Greater Manchester campaign.

He spends his time visiting businesses individually or in groups, for example at events hosted by Greater Manchester

Chamber of Commerce.

“Mostly, companies are very positive,” he said. “Generally, it’s something people want to do.

“i’ve spent a lot of time in areas of Manchester talking to shop owners. it’s a difficult sector.

“Everyone i spoke to was positive about it apart from one or two. The challenge is that although people would like to pay the living wage, they can’t do it straight away.”

Skinner said he has had to spend a lot of time clarifying what the living wage is because the Chancellor confused matters by calling the new minimum wage rate the “national living wage”.

“What the Chancellor announced in the national living wage, is not really a living wage because it’s not based on the cost of living,” he said. “This is not a criticism, it is a fact.”

Currently there are 100 accredited living wage employers in Greater Manchester – with a 50-50 split between the public and private sector. There are 2,000 in the UK.

Another company happy to pay the living wage as defined by LWF is Manchester-based cloud computing firm ANS.

Chief operating officer Paul Shannon said the company paid it because it was an acknowledgement that people need an amount of money on which to live.

Tom skinnerco-ordinator, LWF’s Greater Manchester campaign From April 1 hourly pay should

be £7.20, an increase of 50p on the current “minimum wage” rate of £6.70 per hour

From october 1, minimum wage for people aged 21-24 will be £6.95

For 18 to 20-year-olds it will be £5.55

£4.00 for 16 to 17-year-olds who are above school leaving age but under 18, from october 1

For apprentices aged 16 to 18 (or 19 if in the first year) the rate will be £3.40

“We started investigating the issue a while before the last announcement by the Chancellor,” he said.

“We discovered that to recruit the right kind of people there is an amount ➔

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of money that needs to be paid, so we took the bold step of increasing our cost base, even though they might be relatively junior in their roles.

“it’s backed up by our apprentice

academy in that they are almost all technical or aspiring technical staff. We said it was unfair to put them through an aggressive training programme when we’ve got a level of expectation for them where they will work with very big clients and then pay them the minimum wage.”

Shannon was speaking as ANS was about to enter The Sunday times league of the best 100 companies to work.

“For us it’s relatively simple,” continued Shannon. “We know there are some specific challenges in some sectors like retail and social care, but the technical sector is a growing industry. There is no reason to be paying artificially deflated wages.

“if you do that for an extended period, you will end up with staff who aren’t as engaged as they should be and who won’t go the extra mile.”

There was, however, a word of caution. Paul Norris is the owner of Formston Evans, a Bolton-based timber furniture frame specialist, who has also acquired joinery and building firm J Phillips & Sons in nearby Westhoughton, recently.

“The living wage is a fantastic idea in principle,” he said. “But a lot of small businesses are struggling to break even, so any additional costs are going to have a massive impact on their ability to operate and, more importantly, invest.

“if you’re looking two to three years down the road, you’re going to have to completely rethink your plans.

“The other problem is, some of the businesses might try to pass the extra

cost on to their customers. But the customers could be in exactly the same boat.

“if you’re in an industry that traditionally makes good profits, they tend to employ people on very

decent salaries anyway. However, in manufacturing salaries tend to be a bit lower.”

Norris said the living wage on top of the current phasing in of auto-enrolment for pensions could be a big burden for companies.

Meanwhile, supermarket giant tesco has recently agreed a new pay deal with its staff to meet the demands of the incoming living wage.

All hourly paid staff will see their salaries rise on average by 3% to £7.62 an hour – 42p above the £7.20 it must pay from April.

By contrast, “new” workers of any age will see their pay upped from £7.04 to £7.20 by April and then up to £7.24 in July.

However, to fund the changes, tesco is cutting the rate of pay on Sundays and bank holidays from double-time to time-and-a-half, with night-shift supplements applying after midnight instead of the current 10pm.

its offer is well short of the one made to workers at tesco’s main rivals.

Aldi is leading the way with an hourly rate of £8.40 while Lidl and Morrisons pay £8.20, although the latter is funded by cutting paid breaks and Sunday pay. Sainsbury’s has raised its basic pay rate to £7.36.

Greater Manchester Chamber of Commerce has published a report – The Living Wage: Stating the Case.

its purpose was to consult with its members to determine what its position should be on the issue. However, in the latter stages the research overlapped with the Autumn Statement announcement by osborne, which complicated an already confused debate around the official living wage and national living wage.

its research was expanded to include clarification. Led by the evidence, the report was presented to members at the Chamber’s Autumn Assembly, where 91% of members voted in favour of supporting the chamber backing the official living wage campaign.

“our position is on the basis that the push for increased adoption of living wage policies is achieved through progression rather than regulation, and we aim to communicate that it is a good business decision thanks to the benefits

paul norrisowner, Formston Evans

it can ultimately provide in terms of issues of productivity and retention of staff,” it said.

“We aim to make business enthusiastic about this and we are in no way arguing for statutory policy change.”

High AccessMANCHEStEr-headquartered High Access has been accredited as a living wage employer by the Living Wage Foundation.

The business, which provides high-level maintenance and cleaning services to the commercial property market, will see everyone in its 50-strong team receive a minimum hourly wage of £8.25

This will include permanent employees or third-party contractors and suppliers.

High Access managing director Niel Bethell said: “We are an ambitious and growing business with a truly dedicated team that works around the clock for our clients.

“Nothing about the way we do business involves a minimum investment or effort as we seek to consistently deliver the height of expertise.

“As an employer, we feel it is our role to ensure our people feel valued and rewarded fairly for the great work they do.”

Working with commercial property clients from its bases in Manchester and London, High Access utilises the latest technology to address any high-level property maintenance challenge, from building repairs and maintenance to high-pressure washing, pest control and banner installation.

CASE StUdy

niel Bethellmanaging director, High Access

paul shannonchief operating officer, ANS

A fair day’s wagefor a fair day’s work.

Procure Plus is a committed Living Wage Employer,accredited by the Living Wage Foundation.

www.procure-plus.com

Procure Plus Holdings Ltd, Duckworth House, Lancastrian Office Centre, Talbot Road, Old Trafford, Manchester M32 0FP. Main office tel: 0303 030 0030

Procure-A4_BusinessDesk_Layout 1 11/02/2016 13:46 Page 1

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However, for 18 to 21-year-olds and for people aged 16 to 18, the rates of pay remain significantly lower than the Government’s living wage, although from october 1 they will see a slight increase [see p5].

That’s bad news for the apprentices – unless the apprentices work for Procure Plus or one of its contractors.

The Manchester-based social housing contractor was one of the first

organisations in the area to become Living Wage Foundation accredited and has now committed to paying an hourly rate of £8.25, compared with the national living wage of £7.20.

But it has also gone even further by

voluntarily becoming a “living wage plus” employer – paying apprentices and trainees in their first year – regardless of their age – a minimum of £4.70 an hour and those in their second year £6.08.

Senior regeneration manager at Procure Plus, who is also LWF’s North West Champion, Ann-Marie English

qualified staff,” she said. “There has to be a difference between what an apprentice earns and a qualified person.

“one of the big things for me was

THE Government is increasing the national minimum wage – currently £6.70 an hour – to £7.20 from April 1 and rebranding

it the national living wage.

8➔

While fully trained adults stand to gain from the introduction of the national living wage in April the situation for young apprentices is less joyous.

Apprenticeships and fair pay

➔

explained the motivation between the living wage plus scheme.

“Clearly we don’t believe apprentices should be paid the same as fully

‘many people would find it very difficult to subsidise their children through apprenticeships.’

Ann-marie englishsenior regeneration manager, Procure Plus

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that i can afford to subsidise my kids. But many of the people who are tenants of our local landlords can’t afford to.

“They would find it very difficult to subsidise their children through apprenticeships.

“Basically, all of the money we’re spending on estates is generated by the people who live on them. So by doing this, we’re putting something back into these estates.”

English admitted there would be challenges for different industries, particularly the likes of hospitality and cleaning.

“But i don’t think we should allow that to stop us pushing on,” she continued. “if we don’t, all we’re doing is subsidising businesses, because people will claim tax credits.

“A responsible employer should pay a decent day’s pay for a decent day’s work. A person going to work, whether an apprentice or not, should not be on the poverty line. i would be uncomfortable if i was running such a business.”

The apprentice question is where Procure Plus scores, even more than

the Living Wage Foundation, which has no suggested structure for trainees’ pay beyond the £8.25 per hour for adults.

tom Skinner, co-ordinator of LWF’s Greater Manchester campaign, said: “The living wage doesn’t apply for apprentices necessarily. There is

a recognition that people are receiving training as well as pay.

“But if an employer becomes a living wage accredited organisation, we encourage them to do what they can to pay as much as possible.”

Manchester Cloud computing firm ANS has its own structure for apprenticeships which run over a one-year and two-year period.

Chief operating officer Paul Shannon explained: “in the first quarter of the one –year apprenticeship, the candidate receives £6,000 (per year), rising to £7,500 in Q2, £9,000 in Q3 and £12,000 to £14,000 in Q4.

“our minimum apprentice wage is £3.30 an hour. By the time they graduate they are on £8.25.”

With the cards stacked a little bit against apprentices, will companies be tempted to overload their workforces with too many trainees as a way of getting cheap labour?

Not according the owner of Bolton-based timber furniture frame maker Formston Evans, Paul Norris, who has recently bought Westhoughton joinery and building firm J Phillips & Sons.

“i don’t think there will be a negative effect on apprenticeships, because

Business, innovation and Skills told the times Educational Supplement: “The apprenticeship minimum wage is reviewed regularly based on the advice of the Low Pay Commission. it rose by 20% in october 2015 and future increases will be considered on the commission’s advice.”

Although the apprenticeship minimum wage rose to £3.30 an hour last year, the disparity between the two rates is still causing concern.

Stewart Segal, chief executive of the Association of Employment and Learning Providers, said: “it could work both ways. it could be an encouragement for employers to recruit apprentices, but they have got to make that a realistic wage. on the other hand, it would be a concern if apprenticeships were seen to be cheap labour. ➔

‘A person going to work, whether an apprentice or not, should not be on the poverty line.’

companies still need skilled and semi-skilled people,” he said.

“i can’t see companies overloading with apprentices. it’s difficult enough to get people to employ them as it is.

“We’ve got one at J Phillips and i keep saying we’ll take one on at Formston Evans, but we haven’t got round to it yet.”

Meanwhile, sector leaders have voiced concerns about the widening of the gap between minimum pay levels for apprentices and their colleagues.

A spokesman for the department for Tom skinnerco-ordinator, LWF’s Greater Manchester campaign

stewart segalchief executive, Association of Employment

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“We have said there’s room to increase the apprenticeship minimum wage and there might be room to move towards parity with the young person’s rate of £3.87 an hour.”

david Hughes, chief executive of adult education body the National institute of Adult Continuing Education (NiACE), has said that the disparity itself was not the problem, but the scale of the gap was a concern.

“The key issue is making sure employers properly value apprenticeships and give a fair experience,” he said. “Pay is an important part of the programme being attractive to people but not the only part; quality has to be included.

“Part of that is accepting a slightly lower wage in anticipation of promotion, a secure job and a career. i call it a discount. What would be the right level of pay that allows people to be paid fairly but reflects the apprenticeship discount? “

Alison Fuller is professor of vocational education and work at the UCL institute of Education and has said the living wage should have been inclusive of apprentices.

The apprenticeship levyA SiGNiFiCANt factor in the apprenticeships equation is the introduction by the Government of the apprenticeship levy in April 2017, announced in Chancellor George osborne’s Autumn Statement.

it proposes to apply the levy to large employers in all industries to increase their contribution towards staff training.

The payment for the levy will be collected via an employer’s PAyE return to HMrC. Employers will be given an electronic voucher (e-voucher) to manage their funding.

Large companies with a payroll bill of more than £3m a year will pay the levy, but there will be a £15,000 annual allowance. it will

be calculated upon the size of the company and the earnings of its employees – regardless of whether an employer decides to take on an apprentice or not.

The Government argues that the apprenticeship levy will enable employers to have more control over purchasing decisions, replacing the funding which is currently provided by the Skills Funding Agency.

Employers who are fully committed to the programme will be able to claim back the levy money – potentially more than the contribution made via the levy.

The Government has said its new digital apprenticeship voucher will simplify things for all employers

and give them purchasing power over the Government’s contribution to apprenticeship funding.

Under the voucher scheme, employers register their details on a system being developed by the Skills Funding Agency, which calculates the discounted rate at which employers can purchase training - up to 100% for 16 to 18-year-olds.

Employers will then be able to pass on their voucher code to the provider that is delivering the training for their apprentice, and the provider will reclaim the value of the voucher from the Skills Funding Agency. Under the system, no funding will be directly given to employers.

‘pay is an important part of the programme being attractive to people but not the only part; quality

has to be included.’

“My personal view is that the minimum should apply to apprentices as it does to everyone else, because they are doing a job,” she said.

Fuller led a study which concludes that apprenticeships are being “misused” by businesses for training existing adult employees.

Her report Does Apprenticeship Work for Adults? called for a radical rethink of the way the Government uses the term “apprenticeship” to avoid it becoming devalued.

Fuller said: “The Government will argue that in order to offset training costs, apprentices should be paid less. it all depends on the deal the apprentice is getting.

“if they can see that they are forgoing wages in the short term for gains in the

long term, there’s less worry for them.

“But if they can’t necessarily see how the apprenticeship is going to help them develop a strong platform for progression and they feel that they are just doing a job from day 1, i can see tensions creeping in.”

The most recent apprenticeship pay survey said that 14% of apprentices were paid below the appropriate minimum wage. it found that non-compliance among businesses employing level 2 and level 3 apprentices was higher than average in hairdressing (42%) and children’s care (26%).

NiACE described the figures as “shocking”. Hughes said: “it brings into question the true motivation of employers and makes you question whether they are really investing in individuals or just want low-paid staff.”

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Shadow work and pensions secretary owen Smith said: “A job should offer everyone a route out of poverty, yet these figures show more than half of families below the poverty line have at least one adult in work.

“While the prospects look ever worse for young people, with 1.7 million left struggling in poverty right at the start of their adult lives.

“For all their bluster and spin, in work poverty is rocketing on this Government’s watch. There are now almost seven million working families in poverty. So it is a gross insult that the tories are planning yet more cuts to the support working families rely on like tax credits, universal credit or housing benefit.”

CoNCErN for young people has been highlighted in a study for the Joseph rowntree Foundation which says that more young people are living in poverty than those aged above 65 because of a lack of well-paid jobs and affordable homes.

it also found that young people were four times more likely to be unemployed than the working age population as a whole and the next generation is facing worse life chances than their parents.

The foundation’s annual state-of-the-nation report, written by the New Policy institute and released in November, found that 400,000 more young people aged between 16 and 24 were living in poverty than a decade ago.

Joseph rowntree Foundation’s chief executive Julia Unwin said the findings

showed fundamental shifts in the causes of poverty and which groups are at greatest risk. it highlighted that a lack of well-paid jobs, genuinely affordable homes and opportunities to get on at work or in education is making it harder for people to build a secure future.

Finding a job is not a reliable route out of poverty, as half of those below the poverty line live in a household with at least one adult in work, the study found.

Unwin said: “The next generation is being condemned to a worse set of circumstances in which to live, work and raise a family. The report reveals that a large proportion of young people are being locked out of the opportunities they need to build a secure future - a secure home, a job that pays the bills and the chance to get on in life.”

“The welcome fall in the number of pensioners living in poverty, thanks partly to direct action from the Government, shows that this is a problem which can be solved.

“We need to see the same commitment to tackling the drivers of poverty among younger people, including low pay, unaffordable housing and difficulties entering into and progressing at work.

“There is an important role for businesses, employers, and local leaders, who must work together if we are to eradicate poverty once and for all.”

tom Macinnes, co-author of the report, said: “The report shows some good news - unemployment has fallen, as has underemployment. The proportion of people in workless households is the lowest for at least 20 years.

In-work poverty on the rise

11➔“But while the labour market has been strong, the housing market is an increasing source of problems - rising homelessness, rising evictions, increasing numbers of families housed in temporary accommodation.”

A Government spokesman said: “The truth is, the percentage of people in the UK in relative poverty is at its lowest since the mid 1980s. youth unemployment is at its lowest level since early 2006 and we know that work is the best route out of poverty.

“That’s why the Government is increasing work incentives by committing to three million more apprenticeships, extending free childcare, boosting earnings through a new national living wage and ensuring people keep more of what they earn by increasing the personal allowance.”

Julia unwinchief executive, Joseph Rowntree Foundation

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The Living Wage Foundation is the voluntary campaign which has been around for about 12 years, encouraging businesses to sign up voluntarily to pay the real living wage, which has been calculated based on the cost of living and is £8.25 an hour outside of London.

tom Skinner, the Greater Manchester campaign leader for the Living Wage Foundation, said: “We take it as a great compliment that the Chancellor has co-opted our term.

“But it has been co-opted because a living wage is based on the cost of living and £7.20, just like any previous minimum wage, is essentially based on what the Government wants to bring it to and what the market can afford. We are still encouraging people to voluntarily sign up to the real living wage.”

Greater Manchester Chamber of

Commerce was the first Chamber in the UK to be accredited as a Living Wage Foundation employer about 18 months ago. it has produced its own detailed research report called ‘The Living Wage: Stating the case’.

Christian Spence, head of policy at Greater Manchester Chamber of

works with housing associations on construction sites across the North West, yorkshire & Humberside and the Midlands. it has an annual turnover of £150m and creates around 300

BUSiNESSES from care to hospitality and digital to retail came together at ANS’ northern offices on Manchester Science Park

to discuss the impact the compulsory introduction of a living wage in April will have on their business.

Squeeze until the pips squeak?

➔

Commerce, said: “our message to employers is that all the evidence shows a fundamental benefit to the bottom line.”

Not-for-profit company Procure Plus

’our message to employers is that all the evidence shows a fundamental benefit to the bottom line.’

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Businesses from a diverse range of sectors came together to discuss the Living Wage Campaign’s real living wage, the introduction of the Government’s living wage in April and what both will mean for their businesses.

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AttendeesThe

chris Barry, TheBusinessdesk.com [chair]

paul shannon, chief operating officer, ANS

murray patt, managing director, Alexander Knight & Co

Richard Walker, chief executive, optimo

John perkins, non-exec director, Floorbrite

David Fox, managing director, tampopo

Tom skinner, Greater Manchester campaign leader, Living Wage Campaign

phil eckersley, managing director, Bridgewater Homecare

christian spence, head of policy, Greater Manchester Chamber of Commerce

ian storey, chief financial officer, Music Magpie

mike Brogan, chief executive, Procure Plus

Gillian Bradley, owner, Bradley’s Bakery

Jonathan Dobkin, managing director, Connections

jobs a year – and it has signed up to the Foundation’s real living wage.

Chief executive Mike Brogan said: “We feel that the living wage is only fair and reasonable. if those people were to have more disposable income, that would help everybody else’s business. But it is also fair to say that someone on minimum wage would not feel great about the fact that their employer is paying them the minimum they can get away with.”

it services company ANS Group, which employs 250 staff, signed up to the Living Wage Foundation’s real living wage in december.

Paul Shannon, chief operating officer, said: “That was not an insignificant undertaking. in the tech sector there is an expectation that people will be able to earn above the Government’s living wage. We have a very large apprentice academy, with lots of people being trained by ANS employees to increase the skills pool, because there were just not enough tech based skilled employees that we could recruit.”

Those who graduate from the company’s one-year apprenticeship scheme receive the real living wage.

“it is an extremely aggressive initiative that not many other tech sector companies are doing in the first year. The big risk for us is that we produce highly skilled apprentices because we train them in what we want, not what colleges are doing, so they come out very highly skilled in a short space of time.

“Competitors are then willing, because they have made no significant investment in training themselves, to pay enough over what we pay to be attractive for people. We try to maintain loyalty by big investment. But that’s the risk for us. Thankfully one that hasn’t come to haunt us yet as we’ve managed to retain the lion share of apprentices within the business.”

in November, small business Bradley’s Bakery, which employs 10 staff in Ashton-under-Lyne, was also accredited as a living wage employer. it signed up after it was asked to supply pies to FC United, which requires all of its suppliers to pay the Foundation’s living wage.

owner Gillian Bradley said: “i’d not heard of it but already paid well above the minimum wage so went for accreditation. By paying that we have

good staff retention. Staff put the work in as they are working for a good wage.”

But she admits the business is now “at the limit” of what it can pay.

Skinner said: “to give encouragement, in terms of what happens when people are accredited as a real Living Wage employers versus their competitors, you will see greater retention rates – recruitment is often the biggest hidden cost for businesses and we have a high staff turnover rate in this country. Also, when at the lower end of the spectrum you pay people more and they spend more, it doesn’t go offshore.”

Asian fusion restaurant chain tampopo employs around 130 staff across its three restaurants in Manchester and one in London. Co-founder david Fox said the introduction of the Government’s living wage was “an obvious thing for the Government to do” when in the last recession the impact on jobs was not nearly as much as in other countries.

He added: “it will end when we are one of the most productive countries in Europe and we are not at the moment. But yes, the living wage goes up and then prices go up. UK Plc productively is a poor relation with Europe.

“Apart from those in the care sector, everyone around this table will be more productive. That is the political slam dunk.” ➔

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‘organisations will exit this market - it just will not be viable and we are going to have a problem.’

ANS’ Shannon agreed that the the bigger impact will be the automating of jobs out of the market.

“That’s not just the tech sector – there will be Mcdonalds with no human beings in there. Uber with driverless taxis. The economy needs to be built on intellectual property, although yes, there are some sectors where there is no replacement for people.”

Not one person around the table objected to the premise of the living wage and all lauded the principle of ‘a fair days pay for a fair day’s work’. But even staunch supporters of the principle recognised that the ability to offer all staff the living wage, without an impact on staff levels, depended on the sector in which they operated.

Those within the care sector, in particular, will struggle.

Liverpool-headquartered optimo Care Group provides social care and domiciliary care services, employing around 700 people. Chief executive richard Walker said the biggest problem for the sector was the lack of recognition from local authorities that

the costs of employment have increased considerably over the last two to three years.

He said: “our main problem is that our funding for a good chunk of our business comes from local authorities, health authorities… For a sustainable care sector we need to see proper funding on the table and get away from these silly arguments that someone else can do it cheaper – we don’t want that for care.

“it is getting to a point now where it is untenable.”

Wigan and Warrington based Bridgewater Homecare predominantly offers private client based care, but in recent years has had more of demand from councils to receive its services because of a lack of capacity in the system.

“We do often hear from the council that ‘someone else can do it £2 cheaper’. it is quite often someone new into the market trying to undercut everyone else. over the last five years there have been at least two occasions where the whole system has been brought to its knees because they have been unable to fulfil their contract. it is the end user who is affected by this at the end of the day.”

He added that councils have an “unrealistic expectation” of how much profit home care companies should take.

“i know the council in Wigan believes a net profit of 3% is a reasonable amount to be taken. A lot of people i know are leaving the industry because it is not worth it. if you are turning over £1m and getting £30,000 net profit, what are you doing it for?” he said.

“i do support the national living wage, but it is how it is implemented and where the funding is going to come from to facilitate the implementation for sectors like mine and hospitality.”

optimo Care Group’s Walker added: “organisations will exit this market – it just will not be viable and we are going to have a problem. Social care is fulfilling a large role in the NHS targets and that is not being acknowledged.”

As Brogan pointed out, businesses and the extent to which they may be affected fall broadly into one of three categories: those that are not affected too much (like Procure Plus); those that have limited funding and will

Fox said the drive for greater productivity in the hospitality sector will mean investment in till systems, and reengineering the menu to get food to the table more simply, before adding: “But then with the Mcdonalds model or Pizza Express, how can they be more productive? They will have worked on that for the last 20 years.”

Managing director Phil Ekersley said: “We have not increased our basic hourly rate with the council in three years but we have had a number of increases in the minimum wage in that time and had to make it work. ➔

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‘We are doing the right thing for the people we employ but it is reducing the success of

businesses in the north West.’

the second category. it carries out over 1 million hours a year of cleaning – 52% of that is done on the minimum wage, according to its former managing director and now non-executive director John Perkins.

“Commercially, in the cleaning industry there are some that are coming in and trying to make a quick mark – once a price is out there it is a street price and it is hard to bring that up,” he said.

“it is a very delicate model. in the cleaning industry, if you have got no cleaners you have got no service. it’s the same in care – the quandary of social versus commercial.”

The company is investing heavily in diversification into soft services to spread spend across the cleaning base.

tampopo’s Fox said the hospitality industry is an interesting one because most people on the minimum wage also get tips.

“i always say the best paid job in terms of responsibility is the front of house team. There has been a big debate about tips, and that will rumble on, and there is a Government enquiry on that but the reality is either tips will then be banned - as one New york restaurateur has done - or they will be distributed between the whole team. That’s an interesting debate in our industry,” he said.

“There is no doubt that, in the restaurant industry, prices will go up.”

Music Magpie buys and trades Cds, dVds and games. it employs around 700 staff so even the smallest increase has a significant impact across the cost base.

Storey said that while supportive of the move, the company will see a 4.5% to 5% increase in its wage roll with the changes.

He made no bones about the potential impact it could have. “it will mean that we need to reduce our staffing and increase capital expenditure to reduce

costs to the clients - recent changes to auto enrolment have increased our charge out rates to clients. it will be too expensive to recruit some people and we may get people asking for under 25s because they command a lower minimum wage.”

Murray Patt, managing director of accountancy firm Alexander Knight & Co, added: “i represent a number of businesses and entrepreneurs employing hundreds of people. i think it is only right and proper that people should be paid properly for what they do.”

But he added: “Employers have had to increase their costs with auto enrolment, but where is it going to end? We need support from Government and HMrC to help with this burden. That should perhaps be in the form of lower tax rates, or other forms of support or grants, to help businesses address this.

“We are doing the right thing for the people we employ - but it is actually reducing the success of businesses in the North West, which makes it harder for us as employers to want to take on more people.”

Patt suggested that some companies will find a way to not employ people through the PAyE system and therefore employ more people as subcontractors.

“They run the risk of scrutiny pounces from HMrC but businesses will do that because they cannot suffer cost after cost after cost from employment,” he said.

be severely squeezed (such as those in care, services and hospitality); and those – like Music Magpie – whose businesses could potentially be conducted from anywhere in the world.

Music Magpie’s chief finance officer ian Storey said: “it is social versus commercial impact. We are proud of the jobs we have created, but this will have a massive impact on our ongoing profitability and how we address that.”

£12.5m turnover contract cleaning company Floorbrite falls decidedly into

the number of staff in the business. it is a real difficult dilemma for us,” he said.

“We have banking covenants and forecasts that we need hit, otherwise the impact could affect the entire company. A lot of businesses like ours need to find ways to mitigate that cost.”

Jonathan dobkin, managing director of temporary recruitment firm Connections, based in Altrincham, said: “i support the living wage as a concept. one of the problems we have in our business in terms of supplying temporary employees is the add on