Posted on: Friday May 05, 2017
What has been the impact of the National Living Wage?
A whole year has passed since the introduction of the National Living Wage, and in April of this year, it rose again to £7.50 per hour. It was welcomed by some, feared by others and overall it has been met with mixed reviews. When the statutory minimum of £7.20 per hour was announced, an increase of 50p on the previous lower level, it was publicised as a great opportunity for young staff in the care industry to earn more, but social care employers warned that may be unable to afford it as profit margins were already low. In March 2016 80% of care organisations with over 50 staff over the age of 25, had staff on less than £7.20 per hour, and almost 40% of independent sector direct care workers received less than the proposed £7.20. Some of the larger care home providers even wrote to the Chancellor warning that the NLW would cost the sector £1bn by 2020.
So what actually happened?
Before the introduction of the National Living Wage, there was a lot of coverage in the press about the potential devastating consequences of the NLW to care provision in the UK but many of those fears never materialised.
One of the biggest fears was that with the increase in wages, cuts would have to be made elsewhere. In the retail sector employers cut benefits, such as staff discounts, subsidised lunches and even hours, to cover the cost of wage increases. A Study of 80,000 social care workers published in August 2016 showed 57% of front line care workers have benefited from the raise with ‘no evidence of hours cut to foot the bill’. The care sector also passed on the benefits to those employees under 25 with over four-fifths of under-25s previously below the NLW also receiving £7.20 per hour.
Care was one of the lowest paid of the industries/occupations defined by the LPC (The Low Pay Commission). The introduction of the NLW has actually made care a much more appealing sector to potential employees as it has bought the care sector closer to other industries in terms of pay. Some believe the continual increases in the NLW as we approach 2020 will reduce pay as a barrier to choosing a career in adult social care.
One unexpected negative consequence to the NLW has been the impact on career progression in the sector. The same study showed 32% of care workers are all ‘bunched’ at the NLW level. The gap between frontline staff, supervisors and managers has closed. Employers have the choice of increasing the salaries across all levels of the organisation or offering more rewards and benefits to staff who feel like they have missed out of the 9-10% pay rise received by their more junior colleagues. What organisations need to do in this instance is introduce an initiative that rewards staff in ways that are potentially more appreciated than a few pence more in their pay packet. A Reward and Recognition scheme would be a great way to show appreciation for staff at a time where you aren’t able to offer them as many opportunities as you once did.
Council tax bills also rose around the country to compensate - A survey of local councils found that 82% of them raised fees paid to care providers after ministers allowed councils to add a 2% social care precept to council tax bills.
The cost of Employee un-Happiness
Understandably, care companies may be reluctant to invest in their employees at a time of rising costs. With the bottom line being pinched by the introduction of the National Living Wage, organisations could feel that they are unable to provide any other initiatives to keep staff around and keep them happy. There is a national productivity problem here in the UK, with a growing productivity between us and the rest of the G7, and paying staff more money doesn’t mean they work any harder.
Discontented staff will continue to remain unproductive even with pay rises if they are not happy to be working for you. Staff happiness is shown to have a direct link to productivity and engagement in the workplace. If your staff are happier, they will work harder and stick around for longer. Implementation of an inexpensive benefits programme, reward and recognition scheme or even wellness initiative not only shows you care, but that you want your staff to stay. A pay rise is no longer enough, organisations need to take notice and think of other, more creative ways to make their staff happy.
So what’s next?
So while many have survived relatively unscathed from the NLW increases, helped by increasing worker productivity, increased funding from councils and attracting new talent from other sectors they still have the B word to contend with - Brexit
There are around 84,000 care workers – that’s 1 in 20 of England’s care workers – who are from European Economic Area Countries, and almost 90% of them do not have British citizenship so their future immigration status remains uncertain. In London, care organisations are even more reliant on EU workers with 1 in 9 care workers at risk of losing their right to work post-Brexit. What organisations need here is to support and communicate. Whilst HR may not have the resources to counsel and reassure staff that they are going to support them with what lies ahead, access to an Employee Assistance Programme can support staff through what will be an uncertain and emotionally worrying time. And this may not just be during Brexit, an EAP is a must have to support employees who, in a sector known for low pay, may need additional wellbeing support.
We have been making staff happy and engaged for over 30 years and we have worked with some big players in the Care Industry. Read our case studies to see how we have helped Care South, Barchester and Sunrise Senior Living show their staff that they care, we think you will be amazed by the results.