The Royal Wolverhampton NHS Trust Trust Board Report Meeting Date: 28 th September 2015 Title: Paying the Living Wage Executive Summary: Action Requested: Report of: This paper sets out background, current position, principles of application and the benefits of the Living Wage. The Board is asked to give its final approval for implementation of the Living Wage with effect from 1 st October2015. Director of HR & Organisational Development Author: Contact Details: Links to Trust Strategic Objectives Shelley Feaver - Human Resource Manager - Workforce Email shelley.feaver@nhs.net or d.locke@nhs.net Objective 6. To attract, retain and develop all employees and improve employee engagement year on year. Resource Implications: Risks: BAF/ TRR (describe risk and current risk score) Public or Private: (with reasons if private) References: (eg from/to other committees) Appendices/ References/ Background Reading NHS Constitution: (How it impacts on any decision-making) Revenue: Capital: Workforce: Paybill funding Funding Source: N/A Public Joint Negotiating Committee (JNC) N/A In determining this matter, the Board should have regard to the Core principles contained in the Constitution of: Equality of treatment and access to services High standards of excellence and professionalism Service user preferences Cross community working Best Value Accountability through local influence and scrutiny
Background Details 1 In 2001, the Living Wage was first introduced in London by members of London Citizens, with KPMG becoming the first private sector organisation to pay the Living Wage. By 2011, London Citizens had become Citizens UK and was instrumental in extending the initiative outside of London. 2 What is the Living Wage? Citizens UK defines the Living Wage as a calculation of salary which ensures that employees will earn enough money to provide their family with the essentials of life. The Living Wage is calculated by looking at the basic cost of living and describes the minimum hourly wage necessary for an individual to meet their own or their family s basic day to day needs including housing, food and clothing. It is made clear in the definition that this does not include desirable items, such as cars or holidays. The Living Wage is distinct from the statutory National Minimum Wage (NMW - introduced in April 1999) which was created to provide a floor below which wages should not fall and is reviewed each year.. The current figure for the Living Wage is 7.85 per hour, outside of London. Revised calculations are announced by the Living Wage Foundation annually in November, and organisations wishing to adopt the revision are advised to do so before the following April. The sum announced as part of the Government Budget statement is for a lesser amount ( 7.20 per hour) and will be compulsory from 1 st April 2016, and in essence sets a new minimum wage for those employees aged 25 years and over. The Living Wage calculation that The Royal Wolverhampton NHS Trust is committed to adopting is discreet and different from the sum announced by Central Government recently in the Budget Statement, and is a voluntary measure. For the purpose of this report and for clarity the RWT initiative will be called The Living Wage. 3 Current Position The Royal Wolverhampton Trust has committed to becoming a Living Wage Employer (as defined by the Living Wage Foundation), with effect from 1 st October 2015 with the first payments being in the pay packets of those eligible at the end of October 2015. The Trust sees this as an investment in its staff, their welfare and that of their families. RWT, as an NHS employer, is bound by the pay scales defined by Agenda for Change, which are intrinsically linked to job evaluation. Each job is paid according to its formal job evaluation and attracts a nationally agreed salary for that level of role and responsibility. Numbers of Staff Affected by Proposed Change (as at end of July 2015)) Contract Number of Staff who are eligible for the LW payment Additional LW cost per annum Employed 451 86,613.04 43,306.52 Bank* 409 26,401.40 13,200.70 Total 860 113,014.44 56,507.22 In year effect (6 months) *eligible Bank workers are those who continue to be active, i.e. anyone who has not taken up an assignment with the Temporary Staffing Bank over a period of 3 months or more are not included Page 2 of 7
4 Principles of Application It is proposed, as per the guidance from the Living Wage Foundation, the Trust will make payment of the Living Wage to all staff directly employed by the Trust who are aged 18 years and over and are currently paid below the hourly rate of 7.85. The payment will be: Made only on base contracted hours Paid pro-rata for part-time employees Will apply to all substantive (eligible) employees and Bank workers. Capped at 37.5 hours with any additional hours paid at their substantive hourly rate (per Agenda for Change pay schedule). If an employee has multiple contracts which give them a weekly total of hours worked in excess of 37.5 hours then only the first 37.5 hours will attract payment of the Living Wage; with the primary contract being considered first. The additional payment will be made as a separate pay allowance to reflect the Living Wage top up value. This payment is not linked in any way to evaluation of the job. In effect, those employees eligible will be paid a salary which is equivalent to 7.85 per hour without actually increasing their hourly rate as defined by the Agenda for Change pay schedule. As the hourly rate will not be uplifted or increased, any enhancements, allowances or payments which are linked to hourly rate will not be affected, and therefore not increased. The Trust reserves the right to review the payment of the Living Wage and to consider variation of the calculation based, on affordability, as part of its annual Financial and Budget review process. In order to preserve the principles of Agenda for Change, the proposal is to pay any additional monies due (as a result of adoption of the Living Wage) as a distinct topup payment rather than to increase the base hourly rate. This would mitigate any potential equal pay claims, on the basis that the payment is clearly recognisable as an initiative to assist in the cost of living and is not seen to be linked to job evaluation. 5 Benefits of the Trust adopting the Living Wage In addition to RWT being committed to adopting the Living Wage,, it is also envisaged that there will be the following benefits to the organisation: It will improve the Trust employer brand - demonstrating our ethical approach to employment It will improve market competitiveness It will bring us in line with Wolverhampton City Council who has been a Living Wage employer since 2013 (scheme referred to as the Wolverhampton Living Wage.) and are currently one of the largest employers in the region. The Living Wage Foundation also reports the following benefits in adopting the Living Wage: 80% of employers believe that the Living Wage has enhanced the quality of work of their staff. Page 3 of 7
Improved loyalty and customer service. Fewer employee complaints as they feel they are being treated fairly Absenteeism down by 25% - if there is a reduction in absenteeism if would offset some of the cost of the initiative. Improved retention rates. 70% of employees feel that the Living Wage has increased consumer awareness of their organisation s commitment to be an ethical employer. 6 Challenges Actions and Next Steps Chief Finance Officer, HR & OD Director and Payroll met in July and August to work through the issues and implementation process Legal advice sought and risks and issues discussed and clarified All eligible employees and bank workers were sent a letter from the Chief Executive with their payslips -end September 2015 detailing the proposed changes A Managers briefing and FAQs including an example payslip will be issued and placed on the Trust Intranet site so all employees can access the details.. Further Considerations Whilst it is possible in the current financial year to make provision for the additional expense created by payment of the Living Wage, the Trust would like to reserve the right to consider the commitment on an annual basis as part of its annual financial and budgetary planning process. (Example payslip and FAQs attached payslip is purely illustrative and does not represent an actual employee). Final approval to go live with the initiative is now sought from the Board. Page 4 of 7
Living Wage FAQs What is the Living Wage? The Living Wage, as supported by the Living Wage Foundation, is the rate of pay calculated according to the basic cost of living in the UK. It originated in London, but since 2011 it has been a national campaign with an increasing number of employers deciding to pay the Living Wage. It is different from the Governments recently announced compulsory living wage for over 25 s which will come into force on 1 st April 2016. The Living Wage, supported by the Living Wage Foundation, is paid by employers on a voluntary basis, unlike the Governments scheme of Living Wage which will be compulsory. How is the Living Wage calculated? The UK Living Wage is set by the centre for Social Policy at Loughborough University. The calculation takes into account the Joseph Rowntree Foundation Minimum Standard Research in which members of the public identify what is needed for a minimum standard of living. This is then combined with an analysis of the actual cost of living including essentials like rent, council tax, childcare and transport to produce the Living Wage figure. It is calculated annually. Who is the Living Wage payable to? The Living Wage is payable to all Trust employees over the age of 18, and will be paid to all staff currently paid on Band 1 and the first point of Band 2, including casual and bank staff. What is the current Living Wage rate? The current Living Wage rate for 2015/16 is the equivalent of 7.85 per hour (outside of London). it is reviewed annually and any amendments are released in November of each year. Whilst the Trust is committed to the adoption of the Living Wage, consideration must be given to continuing affordability and the constraints of the Trust s budget and its ability to continue to provide services. Therefore, payment of the Living Wage and the level of pay will be reviewed annually as part of the budget process and financial planning to consider the impact on Trust finances. How will this be paid? The Living Wage will be paid to all eligible staff as a separate top up payment in their salary, therefore the base hourly rate for those staff will remain the same, and it will not alter their pay grade and band. The sum will be paid pro-rata to the number of contracted hours for each eligible employee, and up to a maximum of 37 ½ hours. Bank staff will be paid the Living Wage pro rata to their basic hours. SEE ATTACHED EXAMPLE SALARY SLIP Page 5 of 7
How will this affect my tax and pension payments? The Living Wage payment is subject to tax and pension deductions, so you may see a small rise in the amount of tax and pension contributions that you pay. What will happen if I get a progression point or a promotion? If your salary increases further than 7.85 per hour as a result of gaining a progression point or promotion then your normal rate of pay will have risen beyond the Living Wage rate of pay and you will no longer be eligible for the Living Wage top up and at this point it will stop being paid to you. If your salary increases, but is still less than 7.85 per hours then the Living Wage top up payment will be reduced so that your pay is no higher than the Living Wage hourly rate of 7.85. How will this affect overtime payments, enhancements and allowances? As the Living Wage will be paid as a separate top up amount, and not as an increase in the hourly rate of pay, it will not affect any other payments which are based on the hourly rate. Nor will it have any effect on any other allowances or payments. What will happen to any state benefits that I am claiming? It is not possible for the Trust to comment on your individual circumstances. However, the Trust understands that some staff may have concerns about the impact of the adoption of the Living Wage on any benefits that they are currently receiving. You can also visit the following websites for advice The following organisations or websites may be able to advise you : Wolverhampton City Council Advice Line (in conjunction with Citizens Advice Bureau) 01902 572006 Monday to Friday 9am to 5pm Or alternatively www.gov.uk/benefits-calculators Page 6 of 7
Q1. Why hasnt my Hourly rate chanaged to 7.85 A1. Your Hourly rate, has not changed. However, you will see a Living Wage payment which tops up your salary to the equivalent of 7.85 Q2. My enhancements are being paid on my hourly rate and not A2. The Living Wage only affects your Basic Pay Hourly rate, upto the maximum of 37½ Hours. Enhancements are not affected by the Living Wage If Undelivered please return to: Example Payslip The Royal Wolverhampton NHS Trust Royal Wolves Hospital, New Cross Hospital, Wolves WV10 0QP Mr Ivor Notion A & E Health Care Assistant New Cross Hospital 12345678 ESR 225 Monthly 225 z 8512 A & E Health Care Assistant 1/00001/ Assignment Number Employee Name Location 12345678 Mr Ivor Notion New Cross Hospital Department Job Title Payscale Description Emergency Department Health Care Assistant Review Body Band 2 Pay and Allowances (1 = Minus Amount) Description COPY PAY ADVICE - PRIVATE AND CONFIDENTIAL Sa/Wage Inc. Date Std Hours PT Sal/Wage 15100.00 07 AUG 2015 28.75 11576.67 Tax Office Name Tax Office Ref Tax Code NI Number Wolverhampton 671/W8840 1060L CUMUL NR607080C Deductions (R Indicates Refund) Wkd/Earned Paid/Due Rate Amount Description Amount Basic Pay 124.93 124.93 7.7224 964.72 PAYE Add Basic Pay 1.00 1.00 7.7224 7.72 NI D Night Duty EN 44.00 19.37 7.7224 149.64 NHS Pensions 7.1% Saturday EN 29.75 13.09 7.7224 101.09 225 Car Parking Sunday EN 225 Living Wage WTD Pay 18.25 124.93 16.06 124.93 7.7224 0.1276 124.02 15.94 46.83 Year to Date Balances (This Employment Only) This Period Summary Gross Pay 5830.47 Taxable Pay 5416.50 Pensionable Pay 1409.96 Taxable Pay NI Letter D Tax Paid 865.80 Tax Period 4 Non-Taxable Pay NI Pay 5830.47 Other NI Pay Previous Taxable Pay 0.00 Frequency Monthly Total Payments NI Conts 618.03 Other NI Conts Previous Tax Paid 0.00 Period End Date 31 JUL 2015 Total Deductions Pensionable Pay 5830.47 Pension Conts 413.97 Pay Day SD Ref Number 94134002 Employee No 12345678 Pay Method 207.60 149.46 100.11 28.00 Balance C/F 1309.85 0.00 1409.96 485.17 29 JUL 2015 NET PAY 924.79 Q3. I have worked an extra 1 hour but this, has only been paid at my normal hourly rate A3. The scheme starts on the 1st Ocotber 2015. Basic pay is paid on a current month basis, therefore,your Basic Hours of 124.93 would attract the Living Way payment. The ' Add Basic Pay' hour was worked in September 2015 (a month in arrears), i.e. before the Living Wage was introduced -the rate for this hour would be 7.7224 After the 1st October 2015 any contracted hours plus additional hours worked, up to the maximum of 37.5 hours, will attract the Living Wage rate. Bank Staff will be paid the Living Wage on all basic hours paid.