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 think either some sort of small business relief or a more nuanced tax system could help to balance things out and allow small businesses to pay more. There's a hell of a difference between a company employing 200k people where wages are 10% of income, and a company employing 20 where their wages eat up 50%. At the moment the sledgehammer aimed at the Tesco type companies could easily crack the small business nuts

I agree with the NMW in principle. I own a small business and have about 15 employees. They are all paid above the NMW, even though we could get away with paying NMW for some of the positions. We do that because I've always believed you get better performance if you value your employees.

I do have huge concerns about the consequences of the NMW being raised to the levels that Labour are proposing however. We employee some young part timers (aged16-20) who we pay a fair bit more than the current NMW but Labour are proposing raising it to £10 an hour. If we have to pay the almost same for a 16 year old as an experienced 25 year old, we would almost certainly not employ any young staff.

Our business in viable currently, but if our costs (wages) increase dramatically then so would our prices for the products we sell. In the current economic climate that might mean less sales so we would have to reduce the number of employees we have.

Also, whilst I know there are unscrupulous business owners who are happy to pay the bare minimum for their staff while they are rolling in it, the reality is that most of the small and medium business owners I know are just doing OK. By that I mean, they earn a decent living and may well have a nice car & house etc. but they work many more hours than their employees and have the constant pressure that running a business involves. If your employees costs increase to a point where the financial gains don't make the pressure worthwhile then small companies will just reduce the number of employees they have.

@adaline - Tesco dont make huge profits, in face they have been making losses recently. It depends on what you mean by a living wage but ultimately higher wages mean higher costs. The idea that there are somehow unlimited amounts of profits from businesses that can pay people doing entry level jobs huge wages is nonsense. But equally people should be paid fairly for the work they do. But a nmw job will not necessarily cover everyone’s life choices either.

Also many employers are not profit making. I am on the board of community groups and we can afford the living wage at its current level but if it was much higher that would be an issue.

A business owner whose EMPLOYEES are so poorly paid that they qualify for tax credit and free school meals just to get by is on the scrounge, in my opinion. OP is BVR.

YANBU. The amount of people on zero hours, commission only or freelance jobs is huge and they have to face times with no money, uncertain income and instability. How can you plan anything in that situation?

Sorry, don't know how the block caps crept in. I didn't mean to shout.

Making it illegal to pay less than a given amount does not make a worker’s productivity worth that amount—and, if it is not, that worker is unlikely to be employed. That's the problem. Also business owners invest their own money and take the risk of losing it. If there was nothing to be gained personally from taking those risks then new businesses would not open and there would be fewer jobs. Also most big businesses do not start off huge. They get that way because they are producing something that people want!

Sorry, if I wasnt clear, I was thinking of the businesses starts up or other who are paying less than the min wage.

I think you are being simplistic.

Small businesses are the backbone of the economy. They employ millions. They are also a big risk to take on to their owners and many, many of them fail. Supporting them via subsidising wages, especially in the early days, is beneficial to society as a whole.

It isn't that no businesses are taking the piss but for many increasing minimum wage can tip them over the edge. With the economy in such a precarious state it is understandable that there are concerns about proposals to substantially increase it.

There needs to be more nuanced thinking that treats different sized businesses at different stages of development appropriately, with subsidies for workers where that is appropriate. The alternative is a massive increase in unemployment which does no one any good.

Out of interest, how many CEOs/business owners/whatever demand loyalty and complete devotion, yet pay their employees minimum wage?

big companies know they can pay NMW and then people have it topped up with benefits, which is really a benefit for the company because they don't have to pay a living wage.

Is that going to continue, though? In our area at least, tax credits are being switched over to universal credit and, unless I've very much understood, the main idea of UC is not to keep topping up wages but rather to force you to work more, whether your health, childcare or other life circumstances will allow it or not, as they're not planning on giving you any benefits in the first place if they can possibly avoid it.

I don’t think I’m being too simplistic.

People seem to think that it is a crazy socialist pipe dream to expect people working full time to not be in poverty. It shouldn’t be, it should be the expected standard.

Out of interest, how many CEOs/business owners/whatever demand loyalty and complete devotion, yet pay their employees minimum wage?

Oh, I hate this. Job adverts tell you that they want a career-driven, passionate person who will persevere until the job is done, hit the ground running, give it their all, thrive and excel and be a positive catalyst for the success of the business. In return, they will reward you with not a penny more than the government allows them to pay you.

It would at least be refreshing to see an honest advert: "We need this boring job doing and we know you don't want to be there - but if you just get on and get it done and we'll get on and pay you NMW, we both know where we stand."

Again, can someone please tell me how many adults / children a single, full time min wage or living wage job is supposed to support?

Let’s say:

Tom, Dick & Harry all do the same job & earn X.

Tom has no dependents & a partner who also earns X, they are able to cover all basic outgoings comfortably with money left to save / have a few luxuries - they receive no state top ups.

Dick is single with no dependents & is able to cover all his basic outgoings with a bit to spare - he receives no state top ups.

Harry is supporting himself, his partner & child. The family is struggling to make ends meet, they require state help & sometimes have to resort to using a food bank.

Is X a fair wage or not?

Tom & Dick are able to able to live on X, Harry cannot & ideally needs to be paid Y. If the company cannot afford to pay all it’s employees Y, is that company unviable?

@zsazsajuju Tesco dont make huge profits, in face they have been making losses recently.

The UK arm of Tesco (and we are talking about the UK part of the business) has made in excess of £1billion profit every year for the past 3. This year they made £2.153 billion. That is an astonishing amount of money.

They employ the full time equivalent of 223,542 people - if they raised everyone's wages by £1.80 an hour (which is the difference between the current minimum wage and the proposed one) then it would cost them just over & 15 million. Which is a lot of money, yes, but would only reduce their profits to £2.138billion. They paid their CEO £4.6million this year.

citywire.co.uk/funds_insider/share-prices-and-performance/share-factsheet.aspx?InstrumentID=3069

simple economics says that if costs for businesses rise, prices will rise to cover it and then nobody will end up better off.

If we only look at the financial side of it, you may be right.

However, the crucial difference would be that the employees can afford to pay those higher prices from their higher wages rather than as a result of having to rely on the government making them jump through hoops, treat them like crap and maybe eventually grudgingly hand over some benefits to make up the difference.

Also, if the government isn't having to subsidise the businesses paying less than a living wage, it will have more money available to spend on the NHS, education, social care etc.

FullFact:

"Around one million UK businesses in 2017/18 had a corporation tax bill of up to £10,000, meaning in most cases their profits would have been no higher than £53,000."

Often people think that anyone who is below them in the food chain does a job that isn't worth much in monetary terms. And of course, I'm not arguing that the admin staff are of equal worth to the CEO. But they're not as worthless as people think. Admin is one of the most sneered at job title out there. But if the accounts payable people suddenly disappear, the company goes under because no one will supply them. If the payroll people disappear, the company goes under because the staff won't work for free. If the HR admin disappear, the company goes under because no one is setting up interviews and sending out contracts. The CEO wouldn't be able to earn a single penny if there weren't people doing the admin and the shelf stacking/coffee making/table clearing/warehouse work (depending on the huge multinational in question)

I used to be outraged by the unfairness if executive pay until I stumbled on this analysis question posed by a economics professor. "The question should not be whether the CEOs should take huge salaries, the question should be what value are they bringing to the company that the company is willing to pay them those amounts." That CEO is responsible for over 224000 peoples livlihoods and £2.153billion in profits. His salary Vs the profits made is a drop in the ocean to the board who decide his pay.

MissSueDenim

Not so long ago, it would have been accepted as a given that a single person in a full-time job would be in a nice financial position. It was fully expected that supporting a family on it as well would mean tightening belts and fewer luxuries, but it wasn't uncommon for a family to be able to live reasonably and make ends meet on that salary, whilst the singletons and/or those without children would be able to have more disposable income for nice extras on the same wage.

FullFact:

"Around one million UK businesses in 2017/18 had a corporation tax bill of up to £10,000, meaning in most cases their profits would have been no higher than £53,000."

I'd be very interested to know how many of those were tiny/modest/struggling businesses as opposed to the huge ones with very clever accountants who can use every loophole going, offshore accounts and just-legal avoidance techniques to minimise the tax liability to an absurdly low amount.

In my role I am constantly pushing for people to be paid more money, the more they earn the more I earn and the more in the long term the business employing these people would earn given we are all singing from the same song sheet.
The very people who should be pushing pay rises aren’t though, it’s a race to the bottom mindset, goodness know where it’s come from and how we reverse it though

Also it's not about sneering at people. It's about the availability of the skills they provide. Many jobs do not require a huge level of skill and there are many people that could do that role. In your example if payroll downing tools then the company would simply employ others to do it. If there were few people who could do the job then they would command higher pay. If many people could then the rate would be lower due to high availability of the skills required. It's not really very complicated.

@Inliverpool1 I don't disagree with your point, but it only works if the end result is that the staff increase the profit of the company. If they don't then the business can't continue to pay more.