National Living Wage: Is it positive for temporary staff?
Randall Tsolakis-Franka, August 24, 2017
While some aspects of the NLW benefit temporary workers, there are some negative side effects
The National Living Wage (NLW) has been heralded as a fantastic move for low-paid members of staff, labelled as a potential game changer in improving quality of life for low-skilled workers, and frequently referred to as a highly ethical move by the government. But is it as good for the temporary workforce as permanent employees?
Holiday entitlement – Unlike permanent employees, holiday for the variable workforce isn’t automatically set at the minimum of 20 days a year and eight bank holidays. Holiday entitlement for temporary workers is accrued in line with the hours worked and the hourly rate of pay. Therefore the NLW's increase in hourly rate has increased the wages for hours worked, which in turn means the hours accrued in holiday entitlement are also automatically inflated in accordance to the relevant rate of pay. Positive for temporary workers.
Labour budgets – For employers the increase to the NLW would naturally prove to be awkward, and in some cases a setback. In the majority of cases the cost was added to clients' fees to cover the increase. However, in cases of long-term set fee contracts labour budgets may have needed to be adjusted and/or decreased to maintain safe operation from a financial perspective. The positive aspect of this is that overall the adjustment of budgets will allow business to continue as usual. The negative aspect of this is that a decrease in labour budget means less hours available, resulting in less staff working or working hours being divided to fewer hours per head. Naturally this will have a detrimental effect on the workforce and its overall income. Negative for temporary workers.
Cost of living – The increase brought by the NLW improved financial circumstances for just over 2.5 million people, and will increase by 6% every year until 2020 when it should reach £9 per hour. This naturally boosts the beneficiary’s income and helps increase disposable income. Positive for temporary workers.
Inflation – The cost of living is rising faster than salaries overall, which naturally causes hardship. Ideally salaries ought to be increased at a faster pace to match inflation. It must be noted that the economic crash of 2008 resulted in salary freezes or employment termination for many. The proposed yearly increase in NLW could be slightly more to allow the beneficiaries to be able to cope financially with the inflation rates. Negative for temporary workers.
Varying pay rates depending on age – Probably the most controversial clause of the NLW legislation is that employees of different ages are paid differently. Multiple pundits have deemed this unfair, but encouraging the younger generation to educate themselves more to aim for higher-skilled roles is in the national interest. Though people can educate themselves at any age and practical learners learn better on the job. Therefore this could be seen as a penalisation to hardworking individuals who are just as important as all other employees. It must be noted that employers have a pivotal role in this; those who have tight budgets could recruit more youngsters and thus maintain low labour costs while increasing youth employment. Mixed effect on temporary workers.
From a temporary worker's perspective the NLW has increased the income of a considerable amount of workers nationally. It has boosted holiday entitlement payouts and is a fair attempt at improving the cost of living. However this has added a strain to a number of employers financially, isn’t necessarily sufficient to meet the needs of current inflation, and has contrasting pay rates depending on age that could be deemed unfair. Smaller employers have found this challenging, but can capitalise on this opportunity and renegotiate contracts and rates with clients or employ more youngsters to remain financially stable.
Randall Tsolakis-Franka is former head of staffing at Admiral Recruitment