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?

When ex boss of Thomas Cook went on a long spending spree about 15 years ago (Manny Fontenoa Novoa), buying up other companies including the doomed Co-Op stores, his overseas reps were on minimum wage or below minimum (opted out). They were entitled to tax credits, even the ones without children. So the tax payer effectively funded the company and paid for expansion.
There ought to be a law, that no director/CEO/board member can take a divided on bonus while the tax payer is making up the salaries of their staff to meet minimum 'benefits' level.

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

The solution is not to employ staff that your business cannot afford to pay properly.

For example, if a business requires 2 full-time members of staff to function, but cannot afford to pay both those members of staff a wage high enough to live on, then it is unsustainable. If you don't make enough of a profit to pay your staff properly then you shouldn't be employing them.

Yes honestly. How do you want me to pay wages I can’t afford? Whats the alternative to making someone redundant if I can’t adford to pay them? I employed people so the business could be expanded but if expanding the business means paying wages it can’t afford them yes I would scale it back to just me and my co owner like it was when we first started. You have conviently left out only two of my employees are on nmw (2 17 year olds getting experience before uni) so how exactly am I exploiting my employees, my employees are paid accordingly to their qualifications and experience, not all are paid a lot more but as they gain experience they will get pay rises accordingly.

How do you want me to pay wages I can’t afford?

Erm, by doing the work yourself if you can't actually afford to pay for it. Or perhaps scaling back to something you are capable of managing.

You have conviently left out only two of my employees are on nmw

Oh bless you. I was talking more generally than you thought.

So if I scale back I will have to make people redundant so therefore they will have no job. How is that better?

I'm not advocating paying people poorly, or less than the NMW, just making the point that the minimum wage cannot keep going up indefinitely without consequences. It is a fine balance between paying people what they are worth and what the business can afford. If the balance becomes too high in favour of the employee, rather than the employer, then there will be less jobs and more unemployment.

I totally agree that in general wages should not need to be subsidised by the state, but a NMW cannot be based on the assumption that everybody needs to earn enough to support a family for instance. The wage that a young 18 year old, still living at home, needs is vastly different to somebody who has rent to pay and children to support. The latter person may need help from the benefit system whereas the former could afford a nice car and numerous holidays a year.

@Isithometimeyet0987 don't get sucked in. It's just envy. If it was so easy to run a business everyone would be doing it. But it's not, so they're not.

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

No. We are subsidising people’s lifestyle choices not the employer.

If a salary for a certain role doesn’t meet the persons living costs then that’s on no one but the employee themselves. Plenty choose part time work or to have a spouse at home because they know the state will pay out.

It's just envy. If it was so easy to run a business everyone would be doing it. But it's not, so they're not.

Haha! I can assure you, there is no envy here. Perhaps that's the answer though. If everyone ran their own business there would be no need for anyone to employ anyone else.

Erm, by doing the work yourself if you can't actually afford to pay for it.

so you'd rather people to lose their jobs than being paid the legal salary that was taken into account when doing the business plans and creating the business?

Is that so simple? Who is winning? The ones who have just lost the job they were happy to accept when they signed in? The tax payer who has to pay them unemployment benefit? The tax man - so all of us really - who is getting a lot less revenue?

Brilliant solution.

IceCreamAndCandyfloss

You're just being disingenuous. There are an awful lot of people caught in the trap of having to accept a job that doesn't pay them enough to live on because the alternative is even worse. That isn't a lifestyle choice and to suggest it is, is shameful victim-blaming.

It could cripple some small businesses unfortunately, unfair as it seems. For example, children's nurseries. It doesn't take a genius to work out where the extra money will have to come from...no one wins in the end. You'll be given money in one hand and it will be taken away from the other. I wish it could be different but it's sadly not going to be

so you'd rather people to lose their jobs than being paid the legal salary that was taken into account when doing the business plans and creating the business?

I'd rather that when people make their business plans they factor in staff costs that would allow their staff to be paid enough to live on. I can see that for some people though, this is simply beyond the pale.

I wish it could be different but it's sadly not going to be

Well, I'm an optimist and I truly believe it is possible. It would require guts and imagination though and, at the moment, it seems there are too many people with pessimistic and entrenched views who cannot imagine a world different to the way it currently is.

So what is "enough to live on"? Pp have tried to clarify this and got no straight answer. People are talking about minimum wage, living wage, enough to support an individual, a family...

And you can't always scale up by doung more work yourself. In childcare for example that would be illegal. Even in industries where it's not there is often a point where you have to take the leap and hire an extra person before you have a full extra person's worth of work.

When we first started employing people over 10 years ago the NMW was about £5.50 an hour. It has increased above the rate of inflation since then and as such is now a proportionally higher percentage of cost compared to turnover than 10 years ago.

As I mentioned earlier we pay our employees above the NMW and always have done, which was in our business plans, but if the NMW increases disproportionally, then the business plan goes out the window and we do what we can to survive.

Same boat here carrythecan.

Most businesses do not make massive profit. Smaller businesses have to compete with the big businesses.

On problem is that people do not want to pay more for goods. There is a reason Amazon, Aldi and Lidl are so popular. Sorry to anyone affected but Mothercare is a good example - their business model was not sustainable as people go into the store and then buy the items cheaper online. People are losing their jobs because online businesses do not have the same overheads or need as many staff.

Unless you are under 25 minimum wage is the living wage. I do not agree with under 25s being on a lower minimum wage (perhaps under 18 or 19 to give incentive to hire them) and that should be increased.

Small businesses cannot increase wages and compete by making less money and big businesses will not risk profits and dividends so will increase prices. Give the lower paid more money but make then pay more for goods, so they still need a top up.

It is not the businesses (unless they genuinely are paying less than the statutory wage which is illegal) that we need to look at but why people are needing to use food banks and benefits. If people should be able to exist on that amount then why can't they? Food prices are much lower now then previously so is it housing, utilities etc? Looking at the source of why some people struggle on that wage may be the way to tackle this.

I could not employ someone and not pay them a fair wage. I have been considering starting a business abc every time I do, though, I realise that my views on social justice and fairness mean that I would probably struggle to get on my feet initially. Which leads me back to thinking that it might be longer before I can start a business. So I can see how that might deter some from starting business at all, or mean that they think 'if you can't change them, join them'

Maybe you'd like to remember how many of these 'essential' billions-earning CEOs have turned out to be either crooks or incompetents who run previously-OK businesses into the ground?

A lot of economists agree that executive pay is out of control to a really damaging extent, particularly as the people being paid this much, even if they are not idiots who are only getting it because of cronyism, hoard the money in offshore accounts, which effectively drains it from the economy.

Surely, if smaller businesses were unable to expand due to the wage bill, that would leave room in the market for others to start their own micro business. The fact that the preference is to expand and use government subsidies to pay below the cost of living is due to the business owner wanting to make more money. If, for example, nurseries closed, there would be more child minders because the market demands childcare.
Reading through this thread and my head is just screaming at me PHILIP GREEN, I know its a very extreme example but the fact that this man has had his wage bill propped up by YOUR taxes while sitting on his yacht and dipping into the employees pension pot, nothing short of criminal. It actually turns my stomach.

So employers should set a wage high enough for employees who've chosen to have loads of kids? Work part time? Etc.

As per normal on here, let's spend someone elses money.

So employers should set a wage high enough for employees who've chosen to have loads of kids? Work part time? Etc.

As per normal on here, let's spend someone elses money.

I’d suggest some basic reading on the methodology for determining a living wage if you’re interested in a meaningful discussion.

Whose money it is is a very interesting philosophical question when the cost of a business input is currently significantly subsided by taxpayers (and living wage calculations take current benefits rates into account so not even a living wage would eliminate all business workforce subsidy - though taxpayer support would be reduced.)

As per normal on here, let's spend someone elses money.

Is it someone else's money though? If that money has been generated for the business because of the work the employee has done, surely paying them more is just giving them more of the money they themselves have generated.

If, for example, nurseries closed, there would be more child minders because the market demands childcare.

And then child minding costs to parents would increase because having loads of independent child minders would mean none of the benefits of scale that you gain by having large numbers of children in one place such as power, equipment, consumables, etc.