Retales™: London Living Wage - too high a price for retailers?

At the beginning of this month, two thousand people came together in central London to mark the 10th anniversary of the Living Wage campaign, originally launched by London Citizens. The London Living Wage, which the Mayor of London has increased from £7.85 to £8.30 an hour, is 40% higher than the national minimum wage. Over 100 employers, including financial services companies, higher education institutions and public sector bodies, have signed up to the London Living Wage over recent years. However, the retail sector is the "next frontier" for living wage campaigners and last month saw Lush commit to the London Living Wage. Marks & Spencer and John Lewis are reportedly in ongoing discussions with campaigners and Tesco is now the next major target for London Citizens.

But what are the employment law implications for retailers who are considering whether to adopt the London Living Wage? There are a number of issues to consider:

• Employees - although there are clearly costs implications of applying the London Living Wage to all London staff, excluding certain types of workers to minimise the impact, such as part-time, casual and/or temporary workers, could expose retailers to discrimination claims (as such workers may be, for example, predominately female or of a particular race/ethnic origin).
• Overtime - the policy relating to overtime entitlement may need to be revisited, in light of any commitment to pay the London Living Wage. Similarly, any entitlement to paid bank holidays may also need to be considered further, in view of the potential additional cost. Contracts and policies may therefore need to be reviewed.
• Pensions - in 2012 the new compulsory pensions system will increase employer’s costs including mandatory contributions based on earnings. So an increase in pay now will also increase pension contributions next year.
• Location - for retailers with a number of branches both in London and on the outskirts, consideration should be given to the extent of the commitment to pay the London Living Wage. For example, staff working at a branch just outside London may argue that they have similar living costs to those in central London and should therefore be entitled to the London Living Wage.
• Regional living wage - paying the regional living wage, which is currently set at £7.20 an hour, may also be a consideration for retailers with UK-wide branches.
• Contract staff - retailers may wish to ensure that contractors are also committed to the London Living Wage, so that contracted staff (e.g. cleaners, caterers, security etc.) also receive the same wage as employees. This may have a beneficial impact on staff turnover and productivity.

If you would like further information about the impact of the London Living Wage on your organisation, please contact Nick Thorpe, Partner (Employment) or David Gallagher (Pensions).