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Guest Blog: Charles Cotton, CIPD

Why paying a living wage could pay for itself

Given the current political and economic outlook, I wouldn’t be surprised if many employers are questioning why they should pay the real Living wage. Particularly since the increases in various employment costs, such as automatic pension enrolment and the apprenticeship levy, it would seem that opting for a voluntary cost increase would be a bad business move.

However, there are many business benefits to paying the real  Living Wage, as well as individual ones. It will, of course, help employees be their best at work ─ CIPD research has found that one in four employees say that money worries have impacted on their ability to do their job, such as feeling physically fatigued due to lack of sleep, not being able to focus on the job, or being absent from work. Not only do money worries result in stressed employees, this stress can also impact on their ability to make informed financial decisions, so making the situation worse.

It can also create significant business benefits ─ by paying a real Living Wage, employers should be able to see this reflected in higher levels of employee productivity as staff should be able to focus on their jobs without distraction, or take time off work to sort out their money problems.

In addition, by becoming an accredited Living Wage employer, the business will be in a position to improve or maintain the reputation of both its employer and customer brands. Employees will want to work for a firm that pays them and their colleagues a real Living Wage compared with companies that don’t, and this will help save money on recruitment and retention spend in the longer term. Similarly, customers are more likely to want to buy goods and services from a business that they know pays it employees a living wage. Some clients may even prefer their suppliers to be Living Wage employers.

However, while boosting pay will help employees, the CIPD recommends that such an approach should be part of a wider employee financial well-being strategy in order for an employer to get the most effective return on its investment. If all reward decisions are transparent and reasonable, the introduction of a liveable wage will increase the impact of an already holistic strategy that clearly puts its employees first

We would also encourage employers to also think about the staff benefits that they have on offer, which can help stretch the value of the pay packets of their workers. For example, financial literacy programmes can help workers make savvy savings, borrowing or investment decisions, so boosting their financial well-being.

To conclude, while becoming an accredited Living Wage employer can benefit staff, it can also mean significant value for the organisation. As long as an organisation sees the value of an employee well-being programme and the more long term benefits of the appropriate design of jobs, work and training so that the extra money being spent on pay boosts employee productivity, they will reap the benefits of a more engaged, appreciative and productive workforce.


Charles Cotton,

CIPD Senior Adviser, Performance and Reward 


7th November 2017, 17:55
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