SOLIHULL METROPOLITAN BOROUGH COUNCIL. Adrian Cattell (Head of Human Resources) Tel: All Wards

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1 SOLIHULL METROPOLITAN BOROUGH COUNCIL Report to: REMUNERATION COMMITTEE Meeting date: 16 January 2015 Subject/Report Title: Report from: Report Author/Lead Contact Officer: Wards affected: THE LIVING WAGE Director of Resources Adrian Cattell (Head of Human Resources) Tel: All Wards Bickenhill Blythe Castle Bromwich Dorridge/Hockley Heath Kingshurst/Fordbridge Lyndon Olton Shirley South Silhill Chelmsley Wood Elmdon Knowle Meriden Shirley East Shirley West Smith's Wood St Alphege Public/Private report: Exempt by virtue of Paragraph: Public N/A 1. Purpose of Report 1.1 Following the meeting of Remuneration Committee on 13 December 2013, it was agreed to reconsider the Council s position on The Living Wage, on an annual basis. The report outlines the current position. 1.2 The report sets out the current national position in respect of Local Authorities who have adopted the Living Wage. 1.3 The report sets out a number of possible options for consideration.

2 2. Decision(s) Recommended 2.1 To agree to the deletion of scp 6 on Band A. 2.2 To agree to the deletion of scp 7 on Band B. 3. Background 3.1 The Living Wage is calculated by the Centre for Research in Social Policy, Loughborough University, whilst in the capital the rate is set by the Greater London Authority. 3.2 Towards the end of 2014 it was announced that, for 2015, the UK Living Wage rate has been set at 7.85 per hour, an increase of 2.6% on the 2013 rate and 21% higher than the national minimum wage of 6.50 per hour. The London Living Wage rate has been set at Following agreement on the NJC Pay Award which resulted in an increase of 2.2% on all points, the minimum annual salary is now 13,614 (spinal column point 6). This equates to 7.06 per hour. 3.4 Should the new Living wage be implemented the minimum annual salary of an employee of the Council would be 15,207 (spinal column point 11). As a direct consequence, the current lowest salary grade, Band A, would no longer exist and Band B would start at spinal column point 11 (currently point 7). 3.5 The position with regards to Council employees (headcount - excluding schools) being paid less than the living wage as at 1 January 2015 is shown below: Spinal Point Primary Assignments Multiple Assignments Grand Total The cost of implementing the Living Wage is 304,224 for Core Council and 250,728 for Solihull Schools. It should be noted that the Living Wage will increase further on 1 January 2016 and that no Local Government pay award is due until 1 April 2016, at the earliest. 3.7 An earnings cap limits the increase in the Living Wage in any one year, relative to the increase in average earnings. The reference level of the Living Wage that reflects actual minimum living costs as per the formula is 9.20 per hour. 3.8 Living Wage Councils The Latest Position The LGA recently carried out their annual survey of local authorities to ascertain the latest position regarding the implementation of the Living Wage, as at September There are 401 Councils in England, Wales and Northern Ireland. Of this total since the last full survey (November 2013), the number of Councils that have implemented the Living Wage has increased from 77 to 115. In addition, a further 9 Councils, that have not formally adopted the Living Wage, currently pay above its rate as a result of their grading structures. A further 13 Councils have made a firm commitment to implement the Living Wage by a specific date. There are now 25 Councils who are

3 accredited by the Living Wage Foundation. A number of organisations have adopted the Living Wage on an informal basis (either permanently or temporarily) and, equally, a number of organisations have considered and rejected implementing the Living Wage. Some Councils have introduced a supplement approach, whereby a separate supplement is paid to impacted employees in parallel to the existing pay structure. This allows the existing pay structure to remain intact. Those Councils that have decided against pursuing the Living Wage most often cite costs (including schools) impacting on salary structures and the open-ended commitment to a Living Wage set by a third party. Given the current financial climate, it is also highly likely that increases in the Living Wage will outstrip national pay awards, thereby reducing existing grade differentials. 4. Evaluation of Alternative Option(s) 4.1 Do nothing on the basis that the cost is unaffordable, particularly when the Council is facing unprecedented costs and budget pressures. 4.2 Adopt the Living Wage in its entirety and become an accredited employer with the Living Wage Foundation, by committing to implement with contractors and subcontractors delivering Council services. This option would require procurement and commissioning processes to be reviewed. 4.3 Apply a payment equivalent to the Living Wage. This would be paid as a supplement rather than incorporated into pay rates and, therefore, not be tied to automatic increases, of which the Council would have no control. This supplement could be reviewed annually by the Council. Schools may be resistant to introduce this supplement on the basis that it is unaffordable for them. Furthermore, the costs of catering services would increase substantially as the Council employs a significant number of catering staff who earn a salary that is below the Living Wage. This could significantly impact on the financial viability of this service. 4.4 The Trade Unions have recently requested deletion of scale point 6 (see attached letter). This would result in Band A only having three incremental points within the grade. The Committee is now asked to also consider the deletion of scp 7 as the minimum point on Band B. The cost of implementing this option would be 26,684 for the Council and 27,026 for schools and attempts will be made to contain the costs within existing budgets. 4.5 The Trade Unions have also requested the deletion of Band A (see attached letter). This would not have any immediate financial implications over and above the costs referred to in paragraph 4.4. Going forward however this would result in all employees currently on Band A having increased headroom of 2,497 per full time post, plus on costs. There are currently 921 employees on Band A with a full time equivalent (FTE) of 275. This includes 567 schools staff with an FTE of Reasons for Recommending Preferred Option 5.1 Implementing the option outlined in paragraph 4.4 would be an affordable step in increasing the minimum hourly rate of the Council s lowest paid employees. 5.2 Implementing the Living Wage and seeking accreditation would result in a loss of control of future pay increases which may also not continue to be capped.

4 5.3 Deleting Band A would have significant financial implications both for the Council and schools and create a headroom cost of just over 800,000 including on costs as all employees would have the potential to reach the top of Band B which goes beyond the Living Wage. 6. Scrutiny 6.1 This report has not been presented to any Scrutiny Board. 7. Implications 7.1 Policy/Strategy Implications It is anticipated that the austerity programme will continue to affect Council budgets long after the rest of the economy has largely recovered. Therefore, as the economy is generating significant numbers of flexible, lower-skilled jobs that can pay more than some Councils are able to offer, this could impact on the Council s ability to recruit employees at this level over the medium and long term. 7.2 Meeting the duty to involve Not applicable. 7.3 Financial Implications The financial implications are outlined above. 7.4 Legal implications If it is decided to introduce the Living Wage, this should not give rise to legal risks providing it is implemented appropriately. 7.5 Risk Implications The risk identified is concerned with the number of scale points in each band. Dissolving scale points introduced over a number years will mitigate against this risk. 7.6 Statutory Equality Duty If it is decided to introduce the Living Wage, this should not give rise to equal pay claims, providing it is implemented consistently across the Council s employees. 7.7 Carbon Management/Environmental Not applicable. 7.8 Partner Organisations Not applicable. 7.9 Safeguarding/Corporate Parenting Implications None Customer Impact None Other implications None. 8. List of Appendices Referred to 8.1 Appendix A Letter from Trade unions Dated 3 November Background Papers Used to Compile this Report 9.1 N/A

5 10. List of Other Relevant Documents 10.1 N/A

6 APPENDIX A Living Wage employers as at September 2014 R E G I O N IMPLEMENTED FIRMLY COMMITTED EAST MIDLANDS Amber Valley BC Ashfield Bassetlaw Derby City Bolsover DC Corby BC Derbyshire CC Gedling Leicester City Lincoln City Melton Newark & Sherwood North East Derbyshire North Kesteven Nottingham City Nottinghamshire Oadby & Wigston West Lindsey Total for Region 16 2 EAST OF ENGLAND Cambridge Stevenage Colchester Harlow Ipswich Norwich Thurrock 1 Total for Region 6 1 LONDON 2 Barking & Dagenham Barnet Brent Camden Corporation of London Croydon Ealing Enfield Greenwich Haringey Harrow Hounslow Islington Lambeth Lewisham Merton Newham Redbridge Richmond Southwark Sutton Tower Hamlets Waltham Forest Total for Region Applying the London Living Wage 2 In addition Hackney, Hammersmith & Fulham and Westminster have pay structure reasons that mean that all employees are already paid more than the Living Wage without the need to specifically adopt it

7 R E G I O N IMPLEMENTED FIRMLY COMMITTED NORTH EAST Newcastle Total for Region 0 1 NORTHERN IRELAND Belfast Total for Region 1 0 NORTH WEST Allerdale Manchester Blackpool Oldham Burnley Rochdale Bury Trafford Carlisle Wigan Chorley Copeland Hyndburn Lancashire Liverpool Preston Rossendale Salford Stockport West Lancashire Wirral Total for Region 16 5 SOUTH EAST 3 Brighton & Hove Southampton Cherwell Crawley Dartford Eastleigh Epsom & Ewell Gravesham Oxford City 4 Slough Surrey Tunbridge Wells Waverley Winchester Total for Region 13 1 SOUTH WEST East Devon Bristol City Exeter Cornwall Forest of Dean Gloucestershire Gloucester City Mendip North Dorset Plymouth Sedgemoor South Gloucester Stroud Taunton Deane Tewkesbury Total for Region In addition, Elmbridge, Guildford, Maidstone, Shepway, Swale and Tandridge have pay structures that mean all employees are paid at or above the Living Wage, but the authorities have not formally adopted it 4 Committed to paying 95% of the London Living Wage

8 R E G I O N IMPLEMENTED FIRMLY COMMITTED WALES Caerphilly Newport Cardiff Monmouthshire Swansea Total for Region 4 1 WEST MIDLANDS Birmingham Bromsgrove Coventry Malvern Hills Newcastle-Under-Lyme Nuneaton & Bedworth Redditch Rugby Stoke on Trent Stratford District Warwick District Worcester Wychavon Wyre Forest Total for Region 14 0 YORKSHIRE & Barnsley HUMBER Calderdale Doncaster North East Lincs Rotherham Scarborough Sheffield Wakefield York Total for Region 9 0 TOTAL Those authorities in bold italics are accredited by the Living Wage Foundation (as at September 2014)

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