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?

We are effectively subsidising every company whose workers are in the position of having to claim additional benefits. It’s disgraceful that someone in full time work still has to rely on top up benefits to get by. Who are the scroungers in this scenario?

A pp commented that people want to earn more and pay less.

Yes probably true - to a certain extent. Some companies could absorb this (a reduction in profits) but not all. The few rather than the many

It would be good if we could all earn more and pay that same amount (or maybe a bit more)

CEO and senior staff only allowed to earn a certain multiple of staff on the lowest pay seems a good way of keeping the lowest pay on the top agenda.

“All through the summer the crowd of ragged-trousered philanthropists continued to toil and sweat at their noble and unselfish task of making money for Mr Rushton.”
― Robert Tressell, The Ragged Trousered Philanthropists

We are effectively subsidising every company whose workers are in the position of having to claim additional benefits.

Well said. Said but true.

YANBU. I find minimum wages appallingly low. The government is subsidizing businesses at all levels.

I would much prefer corporation tax was cut, but wages increased. Paying taxes to government to redistribute as benefits is grossly inefficient.

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?

@theEnglishInPatient I don't expect people to be paid the same, what I'd like to see is less of a gap in what people at the top earn compared to people at the bottom. The UK is one of the most unequal in the world.

Some execs earn their six figures. They work hard, they drive success and the company is more profitable and jobs are secure. There are also a lot of over promoted, over paid people out there in the corporate world.

@Oakmaiden Tesco made a £6.4bn loss in 2014. If you want to raise staff wages when they make a profit, are the staff going to pay for losses?

Tesco is a huge company and doesn’t make extraordinary profits (in fact it operates in a very competitive market). It’s not specific to Tesco but many similar businesses are competing on price which is good for the consumer. I’m not suggesting that staff shouldn’t be paid a fair wage, but there has to be a balance of interests like in any area.

People just then employ fewer people. I choose to have no employees. it's simpler.

Other countries including Japan and Germany have rules that the top earners are not permitted to earn more than eg 5x the rate of pay of the lowest paid member of staff.

@Oakmaiden

Can you walk us through that maths.

£15m at a nmw bump of 1.80 per hour would pay for 1 week per staff member at the higher rate.

That rate increase would cost Tesco £780m by my maths.

And more generally. This perception that the shareholders are the ones reaping the benefits. Who do you think owns the shares? A huge amount are held by pension schemes which are not the preserve of the rich. You hammer tesco profits you hammer the pensioners, not some rich guy.

@Inebriati

That’s got to be bullshit. The ceo of BMW received 2.7m euros. His base salary before bonus was 454k.

I can assure you the lowest paid employee of BMW is not earning 90k, let alone the 500k that is a fifth of the ceo salary.

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.

Whereas I totally agree with this ^ and I agree with the concept at looking at 'multiples' in terms of comparing what the higher and lower earner are paid within the same organisation, I still think your original question is far too simplistic.

Just look at how many threads there are on here about how the cost of childcare is so high - yet, overwhelmingly, the staff in those Nurseries are on NMW. Often, even the Managers (with HUGE responibilities around Child Protection as well as 'managing' a business including all sorts of legal hoops they must jump through) are on less pay than a graduate would hope to start on.
If all those staff were paid their true value, how are you going to balance the books, as the parents using the facility don't have the wiggle room in their budgets to pay out 50% more for their childcare.

@Usernumbers1234

Err... yes. I accidentally forgot to multiply it by 52. My point stands, though, they still make an enormous profit, and will continue to do so if they have to adjust their wage structure. (1.8x37.5x52x223,542).

I was just thinking - the real problem is shareholders, isn't it? Companies don't really need to make profits, as long as everyone who works for them gets paid and there is enough capital to expand (and making the very outdated and Victorian assumption that the owner works as part of the business and draws pay from it - albeit at a higher level than everyone else). But then we have plcs and shareholders and it all stops working like that and become about how much profit is turned year on year...

It depends on the business. I pay all employees a wage depending on their qualifications and experience. But I hire two 16 year olds to help out with Saturday as assistants in some of the younger dance and drama classes, I do this every year for one or two students who want to go on and do performing arts as a career I don’t actually need them, if I had to pay them more than minimum wage I wouldn’t be abale to hire them and they would lose that experience on their cv. Not to mention we as employers have to pay ni and tax. If I was made to pay employees an amount I couldn’t afford if would scale back the business and me and my co owner would run it between us but we would have to make everyone else redundant, is that what people what more people unemployed because if nmw is set to high that’s what will happen.

Companies don't really need to make profits

So where do they get the money from to start with, or expand? Shareholders put money into companies as an investment, to allow the companies to grow, expand and develop. In return, they get dividends. A bit like interest on a savings account. Without "profit", there can be no dividends, so the shareholders would get nothing back, so they just wouldn't invest in the first place.

I think it's the people with a very weak grasp on business/ economics/ reality that think business won't just close, lay off staff or cut their hours if needs be. Many of the older generation suffered through the strikes in the 70s. It hasn't happened to the younger generation so they don't believe it will, perhaps this is why the older generation are more likely to vote conservative. They know how shit things can get.

In large public companies then yes - the shareholders are generally not involved in the day to day (some will be as company directors generally have shares as do some employees) and are an extra layer to be paid. But as PP pointed out, the biggest shareholders are pension companies.

But also, the shareholders investing in the first place is often what created the capital to allow the business to grow. Money has to come from somewhere to start and develop a company.

In the 5 and a bit years since we opened our business NMW has gone up roughly 30%, well above normal wage inflation or price inflation. I can't find exact comparison stats but in a similar-ish period, private rental prices in my area went up over 40% which I think is the main issue around here.

Our fees have hardly budged, but now that we're a bit more established we will have to put them up each year in line with our pay rises (which are in turn in line with NMW raises - everyone is over NWM but at a proportionate rate so when NMW goes up our salary scales all shift) which will hurt parents but there's no choice. We can't absorb that sort of rise endlessly.

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

Totally disagree. Some jobs require little or no skill so don’t warrant a higher wage.

Also, some people live within their means and others go ahead with a lifestyle outside their salary means and that’s never the employers fault. Many choose to have children, live in expensive areas, work few hours or have a partner that doesn’t work etc.

I think part of the problem about the perception of company profits is that people think the money is just pocketed by the owners, directors & shareholders. This may be true of a small numbers of companies but I'm sure that it's not the case for most.

My company makes a profit on paper, but in reality it isn't sat there in the bank. The reality is that there is always a huge chunk of money that we are waiting to be paid by our customers; another chunk has been spent on investing in new equipment/materials/building maintenance etc. Most small companies need a certain amount of cash flow just to operate on a day to day basis and the cash flow amount is often greater than the profits.

It's often a continual stream of expenditure just to keep the company ticking over, never mind the re- investment is needed to grow a business. Any changes to the system that increases costs has the potential to send a company into the red unless they make changes. If the wage bill goes up, you put up your prices or reduce the number of employees. Either way, even with the best will in the world, it's really not as simplistic as just paying your staff more.

The whole system is messed up and I'm not sure how we, as a country, fix it.

If I was made to pay employees an amount I couldn’t afford if would scale back the business and me and my co owner would run it between us but we would have to make everyone else redundant, is that what people what more people unemployed because if nmw is set to high that’s what will happen.

Honestly?
I would like people to stop pretending that they're some sort of saintly philanthropist when the reality is that they are exploiting their employees and expecting the government (i.e. everyone else) to subsidise their businesses by topping up the earnings of their underpaid staff.

@DontMakeMeShushYou

So what’s the solution? Absorb a unsustainable wage bill until it bankrupts the business?

Honestly? No, they are not doing it to be saints, but neither are they running their hands together thinking how much lovely money they can get off the back of someone else.

Most business's take on staff as they grow and have a need and also so the owners can have cover to take the odd day off.

Most business's take on staff as they grow and have a need and also so the owners can have cover to take the odd day off.

But if they are taking on those staff at a less than decent wage, then they haven't grown enough.

And why is needing cover to take a day off justification to pay somebody poorly?

BackforGood

If all those staff were paid their true value, how are you going to balance the books, as the parents using the facility don't have the wiggle room in their budgets to pay out 50% more for their childcare.

I am not British and I am reading this from my own country (in the EU). Over here there is a separate minimum wage for every sector of the industry (e.g. retail & distribution, tourism, factory work, medical staff, etc). As for childcare, our government subsidises state run childcare facilities, so the fee parents pay for childcare is based on their income.
Would this work in the UK?