Industry expert warns of challenges posed by year-on-year increases to Living Wage

Industry expert warns of challenges posed by year-on-year increases to Living Wage

A senior security industry professional says that increases to the Living Wage – which amount to 20% in two years – can no longer be absorbed, even though employers want to do right by their employees.

So Managing Agents responsible for multi-tenanted buildings have a vital role to play in better promoting the value of security officers to their tenants, and why any increases are justified.

“If the tenants see the value of the officers on the front desk and securing their offices at night then it becomes easier for them to agree to any additional costs their agent may wish to charge,” says John Fitzpatrick, Managing Director of Danhouse Security.

“The challenge with the London Living Wage is that it typically applies to employees working in service industries where the margins are already very thin,” he continues. “That means absorbing an increase is simply not feasible if that business wants to remain competitive. The costs have to be passed on in cases where an erosion of margin is simply not an option.”

The real Living Wage is now set at £13.15 an hour for workers in London. Organisations like Danhouse recognise that it is good for business: “We know it helps retain our existing teams as well as attracting new talent,” says John. “We also know it is also important in winning new business, especially when it comes to getting through procurement.”

Since it was first introduced, the amount has steadily risen to take into account inflation and an increased cost of living. Since 2016, the wage has increased by 40%.

At the end of October 2023, the amount was raised again by a further 10% from £11.95 to its current level of £13.15, giving employers until 1 May 2024 to implement the changes required. It’s £2.73 more per hour than the Government’s National Living Wage (which was also increased by 10%) and higher than the £12.00 voluntary real living wage (which applies to UK businesses outside of London) and is designed to reflect the higher costs faced by those living and working in the Greater London.

Some high-profile businesses like Capita have now dropped their commitment to real living wage, concerned about future affordability: “Even supporters of the living wage concede that the rises have been difficult to absorb,” John continues, “but similarly take the view that there is no point in signing up to the scheme if only to instantly withdraw once it becomes too rich to accommodate. ”

“This is a familiar argument to those of us who have spent the last 30 years or so in the manned guarding industry. The service providers want to pay their officers well, but there is only so far they can go and how much their clients are willing to concede in their tenders.”

John says the smart clients long ago recognised the value of a supplier who pays its officers well, for it is ultimately reflected in the quality of service they receive: “They recognise the practical benefits of having an experienced, motivated and consistent team protecting their buildings, their people and their assets, and they are prepared to pay for that consistency. But it can only go so far, and the value of a security officer needs to be more widely promoted and understood,” he adds.

John says that in multi-tenanted buildings, since the cost allocation is typically pro rata of the space that is occupied, a fair way needs to be found of distributing the costs accordingly: “There are challenges too for the agents and service providers alike; fixed contracts don’t always allow for accommodating pay increases they cannot predict, and agents cannot always afford a price hike in one go.”

“Flexibility is therefore key, working through the challenge with clients to implement the changes over time,” he concludes. “This enables organisations like ours to honour the spirit of The Foundation’s mission, and ultimately to ensure the officers are paid a fair wage for the essential service they provide.”

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Living Wage Foundation

The real Living Wage is the only UK wage rate based on the cost of living. It is voluntarily paid by over 14,000 UK businesses like Danhouse Security who believe their staff deserve a wage which meets everyday needs – like the weekly shop, or a surprise trip to the dentist. Over 460,000 employees have received a pay rise as a result of the Living Wage campaign and we enjoy cross-party support. We have a broad range of employers accredited with the Foundation including half of the FTSE 100 and big household names including Nationwide, Google, LUSH, Everton FC and Chelsea FC, as well as thousands of SMEs.