Why ISO system managers should take notice of the Living Wage

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The Living Wage in your ISO ‘Context of the Organisation’

Spedan Ltd have a purpose to support sustainable businesses. Where organisations have or are planning to implement an ISO management systems, they will have to consider the working environment and the needs and expectations of their workers, and for some, the Living Wage will be a critical element of that process. It will be important to identify issues that can affect the organisation, so in this series of blogs, we are outlining some of those key issues. If you would like to know more about the Living Wage, you can access the full text in our online iSHEQ tool, which is available on subscription from £50 per month. 

What is the Living Wage? 

The living wage is an international human right. It is a term used to define a ‘fair and decent’ level of income that would enable workers to meet their ‘basic needs’ and provide an ‘acceptable’ standard of living. This concept goes back at least to the Middle Ages, with attempts being made ever since to define a wage that would provide an acceptable standard of living for workers. The diagram below shows the four key considerations in determining a Living Wage. 

Not to be confused with the national minimum wage (NMW), where a clear minimum hourly pay is legally set, the living wage is not easy to define. The distinction between the two is that the NMW does not necessarily meet the needs of what would reasonably be considered a living wage. But why should companies pay a living wage? Part of the OECD Guidelines for Multinational Enterprises states that companies have the corporate responsibility to respect human rights, and international companies are increasingly recognising this.

The living wage is based on the local cost of living, so will vary from place to place around the world. According to Social Accountability International (SAI), a non-governmental global organisation championing human rights at work, the living wage is: 

‘the remuneration received for a standard work week, by a worker in a particular place, sufficient to afford a decent standard of living for the worker and her or his family. Elements of a decent standard of living include food, water, housing, education, health care, transport, clothing, and other essential needs including provision for unexpected events.’

An International Labour Office (ILO) report stated that in 2018, 8% of the world’s workers live in extreme poverty despite having a job. However, the link between employment and poverty reduction is not always straightforward.
Where wages around the world are too low, the knock-on effects lead to workers working excessive overtime and the use of child labour. 

In the UK, the government introduced the National Living Wage (NLW) in April 2016. It was implemented at a significantly higher rate than the NMW and is only payable to workers over the age of 25. The hourly rate from April 2019 is £8.21.

Why the Living Wage can be beneficial

Although paying a living wage can be quite an investment for a company, it can also reap benefits. As well as complying with international guidelines, it can help protect and build a company’s reputation and brand value, including that of its clients. By taking care of workers, it can reduce costs in the long term, and help improve productivity and quality. Employee motivation increases with higher wages, leading to lower staff turnover; thereby decreasing recruitment and training costs, and happy and experienced staff are more productive than new or dissatisfied staff.

ISO Management systems and the Living Wage

If your organisation is affected by the Living Wage, it will be important to identify this in your documented ‘Context’. There may be associated risks or opportunities that you can manage through the Plan-Do-Check-Act process. Specific references are most likely in regard of Clause 4 (Context), Clause 5 (Leadership), Clause 6 (Risk Planning) and Clause 7 (Resources).  

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