John Fitzpatrick – Overcoming The Challenge of A Living Wage

In his first blog for Infolouge.com, John Fitzpatrick, Managing Director of Danhouse Security, discusses the implications of the recent increase in the Living wage in London and what it means for businesses in the capital.

Within London, there are at least 2,500 employers who pay what’s known as the real Living Wage which is now set at £13.15 an hour for workers in London. It’s not a mandatory amount and they are not obliged to pay their employees such a rate in law, but they’ve decided that it supports their brand and attracts a higher calibre of employee if they do. It’s a statement that gives them a competitive advantage, and one that is increasingly looked for by potential clients seeking a service from a third-party provider – and this includes manned guarding.

Our own business has been a signatory to the wage, determined by the Living Wage Foundation, from early on. Our organisation, like many others, recognise that it is ‘good for business’ – improving our brand, boosting staff productivity and motivation at work. We know it helps retain our existing teams as well as attracting new talent. We know it is also important in winning new business, especially when it comes to getting through procurement.

Since it was first introduced, the amount has steadily risen to take into account inflation and an increased cost of living. Since 2016, the wage has increased by 40%.

At the end of October last year, the amount was raised again by a further 10% from £11.95 to its current level of £13.15, giving employers until 1 May 2024 to implement the changes required. It’s £2.73 more per hour than the Government’s National Living Wage (which was also increased by 10%) and higher than the £12.00 voluntary real living wage (which applies to UK businesses outside of London) and is designed to reflect the higher costs faced by those living and working in the Greater London.

News of the rise was, perhaps not surprisingly, welcomed by many of the key commentators in Government, the unions, and the charitable sector. But is has certainly not been welcomed by all. One high profile business, Capita, which had previously committed to the real living wage (including for London) has now dropped its commitment, as has the brewer and bar operator BrewDog. Capita said that it simply didn’t have the funds to support it. Neil Carberry, Chief Executive of the Recruitment and Employment Confederation, says that two substantial rises in a row have caused disquiet among some of its members who are concerned about future affordability.

Which is an interesting point. The increases – which amount to 20% in two years – are certainly a challenge. Even supporters of the living wage concede that the rises have been difficult to absorb, but similarly take the view that there is no point in signing up to the scheme if only to instantly withdraw once it becomes too rich to accommodate.

The challenge is that the London Living Wage typically applies to employees working in service industries where the margins are already very thin. That means absorbing an increase is simply not feasible if that business wants to remain competitive. The costs have to be passed on in cases where an erosion of margin is simply not an option.

This is a familiar argument to those of us who have spent the last 30 years or so in the manned guarding industry. The service providers want to pay their officers well, but there is only so far that they can go and how much their clients are willing to concede in their tenders.

The smart clients long ago recognised the value of a supplier who pays its officers well, for it is ultimately reflected in the quality of service they receive. For many of the managers of the iconic buildings in the city, this is not just a nice to have, it is an essential component of their brand delivery.

These same smart operators also recognise the practical benefits of having an experienced, motivated and consistent team protecting their buildings, their people and their assets, and they are prepared to pay for that consistency. But it can only go so far, and the value of a security officer needs to be more widely promoted and understood.

Most of the buildings a managing agent is responsible for are multi-tenanted, and if the tenants see the value of the officers on the front desk and securing their offices at night then it becomes easier for them to agree to any additional costs their agent may wish to charge.

Of course, there are challenges, since the cost allocation is typically pro rata of the space that is occupied, and so a fair way needs to be found of distributing the costs accordingly. There are challenges too for the agents and service providers alike; fixed contracts don’t always allow for accommodating pay increases they cannot predict and agents cannot always afford a price hike in one go.

Flexibility is therefore key, working through the challenge with clients to implement the changes over time. This enables organisations like ours to honour the spirit of The Foundation’s mission, and ultimately to ensure the officers are paid a fair wage for the essential service they provide.