To think if your business can’t afford to pay employees a living wage then it isn’t a viable business?

[tequilasunrises]

I see so many posts on here along the lines of ‘my/my DHs business couldn’t afford to pay people anymore’, usually defending NMW being so low.

I think that if your business isn’t making enough to be able to pay its employees a proper living wage (ie they don’t have to claim benefits on top or live in poverty) then it isn’t a viable business?

People having more money to spend can also only be a good thing for the economy and businesses surely?

AIBU?

I don't believe that a family should be able to be supported on one wage. It's just completely unrealistic - simple economics says that if costs for businesses rise, prices will rise to cover it and then nobody will end up better off.

It used to be very much possible, though.

Yet their workers go to foodbanks.

What kind of society have we made. What’s the point in it all? Toiling away so that the rich get richer.

On the whole I agree with you OP.

However the situation regarding nurseries is getting ridiculous.

The Government provide "funding" for 2, 3 and 4 year olds and despite this being below the proper market rate the nurseries are told that is what they will get paid.

The nurseries then get told by the Government what they must pay staff regardless if it's actually affordable or not.

I am worried that at some point the whole childcare system will teach tipping point and collapse. A lot of nurseries are closing already and all the parties are offering fab new "free" childcare offers as part of their manifestos. Without childcare a lot of people won't be able to work.

You are absolutely correct don't understand why people don't get this. Firstly yes not everyone has a business that is scalable and can support employees though that doesnt make at a bad business. However those that do if you pay higher wages it is well proven you get better employees who are more motivated and efficient. They are loyal which reduces training costs and time lost to staff who arent capable. It is also well proven that customers do pick up on this and will also show more loyalty to companies with happier motivated staff, which generally means more work and often better paying work.

If minimum wage goes to £10 as is being discussed then we will increase our fees to cover it. There will be no choice, but At that point it will probably be ok to do so simply because all of our competitors will be doing the same, so it won't have too much impact.

If we did this now we'd be out of step with the industry and we'd lose clients hand over fist and everyone would be jobless.

Plenty of small businesses earn enough for the owners to take a reasonable wage after covering all costs, but often not a huge amount more. There's no huge profit margin to call on to increase wages.

None of our team are on NMW btw, they're all above but every time it goes up we shift up to stay ahead. All of our salary scales then move up so the rise goes across the board. We try to be fair, nobody has uncertain hours or zero hour contracts for example.

Cross posted with Lindy - we're in childcare, care work is in a similar place. People assume huge profits without any comprehension of the costs involved.

People should be paid fairly, but the consumer still prefers to go to cheaper supermarkets and cheaper brands, not so much to small independents...

Fair enough, you also buy what you can afford - but you have to be consistent in your argument!

It does cost an employer more than the employee's salary to employ someone

A handy rule of thumb is to add on one third of base salary to give an idea of what the employment "on costs" are. This covers NI, pension, holiday, mat leave etc.

The pay gap is the issue. It's obscene that there are people in a company earning six figure salaries with little accountability while there are people on the ground on insecure employment contracts and going to food banks. There should be some sort of "code of conduct" (legislation probably too much to hope for) that stipulates that execs should not earn more than eg 10 times the lowest salary paid in the company.

John Lewis has this rule although the multiplier is 75 - probably fair enough for such a large organisation and Charlie Mayfield does earn way less than his peers in similar roles. (£1.4m against £3.8m for Debenham's CEO)

In the SME world I work in, the agreed multiplier is between 5 and 10. This kind of rule focuses the mind on fair remuneration. It certainly helps reduce the "them and us" you find in lots of other businesses.

YANBU.

A relative was paying £800 a month for 40 hours a week and was moaning that she had to pay "so much". Unsurprisingly, she had a very high staff turnover.

But what I don't understand is big companies who can actually afford it and also end up with high staff turnover, losing all the talent, then multi-billion contracts.

theEnglishInPatient but the cheapest supermarkets pay the best wages in the industry. As do most of the other supermarkets who are doing well.

I wish people would stop saying that a higher NMW would be inflationary. In pure economic terms, it is true. However in practice, it is not. The UK is proof of this. The introduction of a NMW, and subsequent rises, did not result in higher inflation.

If your employees are earning NMW and using foodbanks but you drive a Range Rover and send your kids to private school I’m sorry but something is very wrong.

Of course everyone wants to make something out of their business but equally you wouldn’t HAVE a business without employees.

I agree that there needs to be stricter multipliers.

People should be paid fairly, but the consumer still prefers to go to cheaper supermarkets and cheaper brands, not so much to small independents...

ALDI and LIDL pay better than any of Big Four.

@adaline

DD worked for Tesco and they do pay more than minimum wage. What is excellent - IMHO - they pay the same adult wage to all staff on minimum wage regardless of age.

I can see so many different sides to this.

My gut agrees that a viable business should be able to pay more. But then comparing someone's tiny cafe in a small town with the gigantic Tesco a couple of miles out of town is just never going to work.

I think huge businesses like Tesco and Asda and the high street banks for example could definitely afford to pay their lowest paid staff more. And I think that senior management of large businesses are seriously overpaid in most cases - I know they have demanding jobs and specific skills that not everyone has. On the other hand, the whole set up is that it is made difficult to obtain these specific skills, so senior staff in big businesses just churn round moving from company to company no matter how well they performed in their previous role.

But on the flip side, the huge profits that the big businesses make don't all go directly to the senior staff, and anyone who has a private pension (which is most people now that it is compulsory for employers to provide one) has an interest in seeing big companies make big profits, because that is what they are reliant on for their retirement income.

But that is a minefield in itself, as the low paid are the very people who can't afford to pay into pensions...

In short, I just don't know the answer. My gut feeling is that multi billion pound businesses should pay good salaries.

None of the examples given above are unskilled though. Family allowance was used by a lot of people to top up family incomes in the seventies. The big difference in affordability though is the change in housing costs. Any attempt to fix income distribution while still retaining a completely unfettered free market in housing is doomed to failure IMO.

but the cheapest supermarkets pay the best wages in the industry.

but what about the local small businesses who can't survive?

It's the same with childcare, people are horrified to have to pay a lot less than the minimum wage for someone to look after their own child. How do they think the business is remotely sustainable and that it's fair for nursery workers to earn very little?

People want to EARN more but PAY less...it's very hypocritical.

I agree the housing market is the biggest problem.

The impact of wages on prices will vary hugely too - in a labour intensive industry it will be far more significant.

It's obscene that there are people in a company earning six figure salaries with little accountability

you do realise that in many businesses it's the people who bring ALL the money for the company...
You cannot expect support staff and sales staff to be paid the same.. what's the incentive otherwise?

Again, as long as the business is legal, pays the right minimum wage and package, it's makes perfect sense. A lot of employers try to give yearly or even twice yearly bonuses, but it has to be a sustainable business.

Aldi and Lidl pay more than the big 4 because they have very little complexity in their business model, and complexity brings about more costs.

They buy in cases where the front is ripped off, so there's very little decanting which takes less man hours. They have very few lines, so they're negotiating with fewer suppliers and are in a strong position to negotiate cheaper supply prices. They also utilise staff fully, so they're unloading, shelf stacking or cleaning when they're not on a till. And as soon as there are no customers to serve, they're off the till

TheEnglishinpatient - and it's a remarkably price sensitive industry. People talk the talk about wanting higher pay for childcare workers but when cheaper places become available they'll happily move content settled children, often for a relatively small cost saving.

DD worked for Tesco and they do pay more than minimum wage. What is excellent - IMHO - they pay the same adult wage to all staff on minimum wage regardless of age.

Same applied to ASDA when I worked there, but we still earned a good £2 an hour less than ALDI.

And the implications are often felt further up the supply chain. The likes of Tesco will often demand their suppliers lower their prices when there are NMW increases or the cost of materials rises. There have been many suppliers - be it in farming, manufacturing etc - who've either made mass scale redundancies, closed sites or the business has folded completely.

Meanwhile, your smaller businesses who cannot do that have to either absorb the increased cost or pass it on to the customer, which further widens the gulf between small business prices and those of your larger multinationals.

The problem I have with benefits being used to top up an insufficient wage, is that it means the government is effectively supporting the business by allowing them to employ people but not pay them enough money. Really, when you are talking about a company like Tesco, who reported a £2.2 billion operating PROFIT this year, that is absurd. They can afford to pay people properly. for the work they do. Surely paying people a decent wage should be more important than obscene profits for the shareholders?

I get it is more problematic for small businesses - maybe there should be a high minimum wage, but then a "small business bonus" where a small business can claim back some of the cost, dependant on their operating profit levels...

I have no problem with benefits and with the concept of society supporting its most vulnerable and needy members. I do have a problem with companies not paying their workers enough for them to live on and expecting the government to make up for their greed.

I am a small business owner, I pay 2 part time employees minimum wage and 2 get paid commission only. I couldn’t afford to pay them all a living wage.

If I did I would have to sack 3 people and employ the one who stays would have to be full time. DH would have to go back to helping me at weekends again.