What price fair pay?

By Deborah Moon, HR Consultant. 

It is, perhaps, an unusual occurrence when there appears to be at least a measure of agreement between Ed Miliband, the leader of the Labour party, and the Conservative London mayor Boris Johnson. But the issue of a “living wage”, and the potential benefits of this, would appear to have united these two more traditional adversaries in a common cause. Speaking at the start of the recent Living Wage Week, Ed Miliband outlined a number of actions his party would take to promote this issue should they win the next election. At the same time, Boris Johnson urged businesses to “wake up” to the benefits that paying the living wage can bring, building motivated and dedicated workforces, helping boost the “bottom line” and ensuring a decent standard of living for “hard working people”.

The recent report from the Resolution Foundation, Gaining from Growth the final report of the Commission on Living Standards provided a comprehensive and detailed assessment of the financial pressures facing low to middle income Britain today and the structural challenges posed to the UK economy. With one in five UK workers paid less than the Living Wage, the report painted a stark picture of declining living standards and the need for a range of actions to boost employment income. Recent figures from the Office for National Statistics provided a further illustration of the continuing squeeze on household budgets, with real-term income for UK workers falling more in the recent recession than in previous economic downturns, driven, for example, by rising fuel, utilities and food costs.

But the issue of the Living Wage is only one aspect of broader concerns regarding pay inequality in the UK. Whilst the higher incidence of low pay in certain sectors such as retail, hospitality and personal services, and for part-time workers, has a particular impact upon women, the gender pay and opportunities gap also continues to persist at more senior organisational levels. The 2012 National management salary survey published by the Chartered Management Institute (CMI) demonstrated the difference in average earnings levels between male and female executives, not just in basic salary terms but in average bonus payments as well. Calling for greater transparency on the issue of pay, Ann Francke, Chief Executive at the CMI, posed the question are women in the workplace worth £10,060 a year less than men?

A number of commentators have also expressed concerns about the impact of current economic measures and political direction on equality and diversity progress more generally, for example, the reductions in the level of public sector employment, where women have traditionally accounted for a larger proportion of the workforce, and the effect of cutbacks in public services, for example, in relation to child and elder care provision. The changing nature of employment patterns and increasing incidence of part-time and temporary working also have implications for pay and reward practice, with a danger that recent trends will see a further polarisation of the labour market.

More broadly, there has been an increasing backlash against perceived pay inequality in the UK labour market, with many people believing that the wage gap, particularly between those at the very top and bottom of our organisations, is disproportionate and not reflective of the efforts and contributions of those concerned – witness the continuing furore over the “high pay culture” and payment of bonuses in certain sectors, particularly where the recipients are perceived not to have delivered increased performance. A recent People Management report outlining the findings from a recent survey by the Institute of Business Ethics, revealed that executive pay was the issue which topped respondents’ list of concerns.

Of course, the debate about “fair pay” raises many interesting questions, including from ethical, moral, political, business and financial perspectives. In support of the need for action on this issue proponents point to both the direct and indirect impact payment of a living wage can have, not just on individual families and organisations but in terms of the wider societal and economic benefits to local communities and the state more generally. During Living Wage week, there were a number of examples given of organisations, in both the public and private sectors, who already ensure their lowest pay levels meet or exceed this, or have committed to working toward this objective (although, as some commentators have observed, for those with proportionately few low paid staff, this may come at relatively little cost). The level of scrutiny and information disclosure requirements placed on certain parts of the public sector, also demonstrate other actions being taken to address pay inequality, for example, reducing/controlling senior management remuneration, limiting pay ratios, and promoting best practice within local economies.

But where does the HR/reward professional stand on these issues? Undoubtedly, within any organisation there will be a range of potentially conflicting concerns and considerations which will need to be addressed in determining the approach to be taken. However, there does seem to be a general consensus of opinion regarding the need to bring about greater fairness and proportionality in pay practices and to provide increased openness and transparency in remuneration policy determination and decision-making, ensuring that the resulting outcomes are fully justifiable. Such actions would appear to resonate with the redefined vision set out by Peter Cheese, CIPD Chief Executive, when speaking at the start of the recent annual conference, emphasising the important role of the profession in championing “better work and working lives, through improving people management and development practices to build greater value for organisations, for the benefit of economies and society."


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