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Living wage

Living Wage logo

Since September 2015, we are accredited by the Living Wage Foundation (LWF) as a Living Wage Employer.

What is Living wage?

The Living Wage (LW) is calculated according to the basic cost of living in the UK. It is an hourly rate set independently and updated annually by the Living Wage Foundation (LWF) and calculated by the Centre for Research in Social Policy at Loughborough University. Employers choose to pay the Living Wage on a voluntary basis, unlike the National Minimum Wage which is a statutory obligation. The current rate for the UK Living Wage (outside of London) is £9.50 per hour (for 2020-2021). The rates for the National Living Wage (for those aged 23 and over) and the National Minimum Wage (for those of at least school leaving age) is detailed below:

Age April 2021
23 and over £8.91
21 to 22 £8.36
18 to 20 £6.56
Under 18 £4.62
Apprentice £4.30

The LWF Living Wage (LWF LW) is updated annually. For further details on the Living Wage as well as details on the historical Living Wage Rates (including a comparison of the UK Living Wage compared to the National Minimum/National Living Wage) can be found on the LWF’s website.

Wider application of living wage in Leicester

As a major public sector employer in the city we recognise our key role in supporting the local economy through paying the Living Wage to its employees, and encouraging others to do so.

We will advocate and lobby at a sub-regional and city level to promote the benefits of the Living Wage to the wider regional economy and as part of a commitment to reduce poverty.

We will explore ways to incentivise adoption of the Living Wage amongst small and medium sized enterprises (SMEs), who may otherwise find it unaffordable, through targeted intervention and lobbying for ‘Living Wage city deals’.

A living wage policy – our living wage commitment

As part of its agreement with the Living Wage Foundation, we will require our contractors (and their sub-contractors) to pay their employees and agency workers, who meet criteria details below (In-scope), the Living Wage, so long as it is legal to do so.

We will encourage and promote on a case by case basis that all employees/agency workers of contractors working on other contracts also be paid the Living Wage. This has the potential to create wider economic benefits for the city.

Scope

The criteria that we are required to use to assess if staff qualify for the payment of the LWF LW on any given contract are provided by the LWF in our Licensing Agreement.

In-scope

This applies to contractors (and their sub-contractors) which supply an employee (aged 18 and over and is not an apprentice or intern) who provides a service to or on behalf of the Council involving two or more hours of work in any given day in a week, for eight or more consecutive weeks in a year on:

  • the Council’s premises; and/or
  • property owned or occupied by the Council (including where the Council is a tenant and is providing building-related services through a lease); and/or
  • land which the Council is responsible for maintaining or on which it is required to work.

Clarification on the definition of “LCC premises”:

The part of the LWF qualifying criteria that focuses on the location of where staff would be working, does not fully account for certain types of Council contracts such as taxi services or highways maintenance.

Therefore where this is any ambiguity or where, if the criteria are applied strictly, contracts fall out of scope but intuitively ought to be in scope to meet our wider commitment to the LWF LW, we will review contracts on a case-by-case basis, whilst ensuring proportionality and relevance.

Examples which would probably be considered in scope are, where there is a:

  1. logistical/implicit requirement to operate from a depot or facility in or near Leicester and we have not specified a location, e.g. transport/highways maintenance or refuse collection;
  2. service delivery point required to be located in or near Leicester, e.g. drop-in centre, but we have not specified exact premises.

Contracts below a £20,000 de minimis threshold are assumed not to meet the above criteria, and will therefore not be required to include Living Wage clauses unless there is clear evidence to the contrary.

We will on an ongoing basis review our contracts database and planned procurement activity to identify which contracts will fall in scope and ensure appropriate action is taken.

Agency staff

We pay agency staff with placements greater than 8 weeks in duration a Living Wage supplement in accordance with the LWF licence.

Social care

It is widely recognised, including by the LWF, that the social care industry, both nationally and locally, predominantly pays its employees at or just above the National Minimum Wage/National Living Wage. There would therefore be considerable financial implications and possible challenges from the supply market if the requirement for payment of the Living Wage was implemented. A potential cost impact in excess of circa £10.3m per annum was previously (as at 2014) identified for adult social care services, and there is no budget provision for this. Hence, Social Care contracts are not automatically subject to our Living Wage commitment.

We are nevertheless very supportive of the principle of the Living Wage for care workers as well as good terms and conditions of employment. We will review each social care contract meeting the criteria set out above (In-scope) to see whether a living wage requirement is feasible and affordable.

Out-of-scope

As well as procurement contracts we enter into a number of other forms of contract and agreement with organisations.  These contracts are out of scope of this policy as they are not with Contractors and in many cases we cannot significantly influence the terms of the arrangement. Examples include grants, schools, concessions, and where we act as a distributor of funding for other public sector organisations, partnership arrangements etc.

However, we will continue to consider ways to promote the payment of a Living Wage to employees of its partners in these arrangements.

In light of increased cooperation with other authorities (under the combined authority proposal and/or other existing partnerships such as the LLEP), it will be necessary to have a further discussion with our partners to determine the feasibility of implementing the Living Wage in any joint procurement exercises. A case by case approach will be required when working with partners on such procurement contracts.

Legal and market consideration

The Public Services (Social Value) Act 2012 places a duty on public authorities to consider Social Value considerations at the pre-procurement stage. Under the Act, we must consider “how what is proposed to be procured might improve the economic, social and environmental well-being of the relevant area, and how, in conducting the process of procurement, it might act with a view to securing that improvement.” We strongly believe that the inclusion of a Living Wage condition in ‘in-scope’ contracts will generally, based upon a consideration of the subject matter of the contract, contribute to the economic and social well-being of Leicester. The Act also states that we may only consider “matters that are relevant to what is proposed to be procured” and “to the extent to which it is proportionate”. We interpret that by applying the criteria details above (In-scope) and will act within the bounds of the legislation, though recognising this will not be applied without regard to the subject matter of the contract.

As a public sector body, we have a duty to treat all bidders equally while procuring contracts for services and works. Whilst implementing payment of Living Wage, we will also need to ensure that it does not discriminate against bidders from the European Union. We consider however that in order for the criteria details above (In-scope) to apply, it is almost certain that the employees in question will be employed in the UK and be subject to UK employment law, and therefore the implementation of a LW condition in the contract does not discriminate against bidders from other countries. Should this not deemed to be the case, we may for contracts with a high degree of cross border interest, decide not to apply the Living Wage policy to ensure compliance with the Public Contracts Regulations 2015.

We recognise that suppliers may face challenges in implementing a LW for our contracts. For example:

  • Staff may not be fully employed to work on our contracts – they may also work on other contracts for other customers; but it may not be possible for the employer to pass on additional cost to its other customers or pay the same employee two different rates for the same work?
  • Similar to the point above, there is the potential to create a situation where two employees of the same company doing the same work for different customers (one being ourselves) may be paid different amounts;
  • In construction contracts, the staff whose salaries are to be augmented may be those of supply chain partners, not the main contractor; there is a concern that the main contractor will apply price pressure which doesn’t allow small supply chain partners to cover any increased employment cost;

We will work with the LWF, its contractors, tenderers and local business groups to aid in resolving these issues, whilst promoting the principle of payment of LW to all staff.

Monitoring and enforcement of contractors

We will publish a list of contracts, including suppliers’ names, in which a LW condition has been included on the internet. Should any identification of non-compliance be alleged or suspected, any party may anonymously “whistleblow” to the Council, and we will investigate the claims aided by the LWF. We will develop procedures to facilitate the whistleblowing process.

In addition to this list, we will regularly promote our LW commitment and update details of contracts included.

Governance and review

We will include this commitment as part of our Procurement/Social Value Strategy.

As per the terms of the Licence Agreement, we will allow the LWF to monitor and audit its implementations of this policy.