Report of Cllr Jabbar, Cabinet Member for Finance and HR and the Executive Director, Corporate and Commercial Services Introduction of the National Living Wage for Oldham Council Portfolio Employees – 1st April 2015 Portfolio Holder: Cllr Jabbar, Cabinet Member for Finance and HR Officer Contact: Dianne Frost, Director of People Report Author: Cathy Butterworth, Assistant Director of People Ext. 5290 25 March 2015 Reason for Decision There is already a commitment for Oldham Council to move to pay the National Living Wage on 1st April 2015 and, through this, to secure accreditation from the National Living Wage Foundation. This report outlines the impacts of the National Living Wage adoption, its’ alignment with our cooperative values and recommends the method of adoption which has been fully consulted. Recommendations: 1. That from April 1st 2015 the Oldham Living Wage is increased to pay just above the 2015 National Living Wage of £7.85 per hour; this by paying SCP 11 on the NJC pay spine and Point 2 on the JNC Youth Workers scales as minimum pay for centrally employed directorate staff across Oldham Council (excluding apprentices and trainees). 2. That Oldham schools be encouraged to follow suit as role model employers. 3. The Council applies for and then proudly displays its’ accreditation by the National Living Wage Foundation. 4. That the intention to monitor the impact of the National Living Wage uplift for the council’s Traded Services as outlined in section 3 be noted. 5. That, in the wake of further review in November 2015 and publication at that time of the 2016 National Living Wage rate, the Council considers its impact and identifies the best means by which continued alignment with the National Living Wage level can be achieved. Introduction of the National Living Wage for Oldham Council Portfolio Employees – 1st April 2015 1 1.1 Background and Current Position In April 2012, Oldham Council introduced an Oldham Living Wage of £7.11 per hour, which was equivalent to SCP 9 on the NJC Green Book pay spine. This increased further in 2013 when the Oldham Living Wage was increased to SCP 10 which was £7.24 per hour, following a local government pay award that year. 1.2 In the wake of an earlier commitment the Council decided in June 2014 to pay the National Living Wage as the lowest hourly rate for its centrally based Directorate staff (excluding Modern Apprentices and Trainees) from 1st April 2015. 1.3 The SCP’s selected yield one penny per hour over the current National Living Wage rate once the 3 days’ unpaid leave have been deducted. This means Oldham will remit £7.86 per hour against the 2015 National Living Wage rate of £7.85 per hour. 1.4 It is felt to be important that, as the initiator of the Fair Employment Charter within the Borough, the Council is a role model in terms of pay and conditions. Many Councils have used a supplement to pay their employees a top up, but the Council wanted to use the existing pay spine so that it can be seen as an integral and consolidated part of our employees’ salaries. 1.5 Oldham Council will be seeking accreditation from the Living Wage Foundation to be a Living Wage employer. Although initial accreditation will cover workers within the Directorates, full accreditation would be based on all procurement and commissioning contracts where staff on our premises for two or more hours a day for eight or more consecutive weeks of the year. Currently, suppliers and contractors to the Council are asked to aspire to the 2013 Oldham Living Wage, and contracts are founded on current best practice which take into account EU Procurement Regulations and EU case law which prohibits restrictions on freedom on cross boarder service provision. 1.6 To date 39 schools have formally adopted the Fair Employment Charter. All schools will be encouraged to also implement the National Living Wage, as part of their commitment to work towards being part of the co-operative borough. As Schools are not subject to an increment freeze, the picture of which schools are paying under the National Living Wage will be different from April 1st, and reports have been commissioned to determine which schools this would apply to, and working with the Schools Finance team, more detailed costings can be provided to these schools in an attempt to persuade them to adopt the National Living Wage also as a role model Fair Employer. 1.7 The Trades Unions have previously been consulted on the implementation of the National Living Wage and have welcomed its increase to the National rate. It was also discussed the application for accreditation to be a Living Wage Employer and the potential impact that it may have in the future on the Council’s grading structure. It is planned to discuss this in more detail in November once the 2016 rate for the National Living Wage has been announced and the degree to which the Council will have to revise its position in order to accommodate the increase for 2015/16 will then be known. 2 2.1 Consultation The recognised trade unions are aware of, and welcome, the Council’s commitment to pay in accord with the National Living Wage. The requirement, in the future, to preserve the integrity of Oldham’s pay line and Equal Pay rigour has been made clear in the course of 2 consultation and there is a commitment to an annual review, impact assessment and consultation on this subject. 3 Financial Implications 3.1 The financial modelling is cited below: Negotiating Body SCP Increase NJC Green Book JNC Youth Pink Book To SCP 11 To Point 2 541 1 £203,528 £50 Sum of Pension £37,042 £9 Sum of NI £21,167 £5 Number of Staff Sum of Difference Total National Living Wage Implementation Costs £261,802 3.2 The main services affected by the living wage costs are Catering, Cleaning and School Crossing Patrols. Whilst at this stage it is anticipated that services can increase income/manage costs to absorb the additional costs in year, the position will be closely monitored to ensure that any budgetary pressures are identified as early as possible during 2015/16. This will be reported, by the Director of Finance (Interim) through the financial monitoring process together with any action required. It is expected that should there be any variances, these would be comparatively low value and therefore could be comfortably managed. (Anne Ryans, Interim Director of Finance) 4 Legal implications 4.1 There are no concerns from Legal Services as to the implementation of the National Living Wage. Whilst this is a non-statutory minimum, it is understood that this is in keeping with the Council’s Fair Employment Charter and with the Council’s commitment to becoming a flagship employer in the Borough. An option which sees employees from both sets of conditions on exactly the same rate of pay would be preferred. (Emma Deighan, (former) Employment Solicitor) 5 Co-operative Agenda 5.1 The concepts of “Fair Employment” and Social Value are built on the business case that to offer decent terms and conditions of employment, such as a Living Wage, is equally good for business, employees and local society. The academically proven premise is that good terms of employment attract high calibre staff, enhance productivity and customer experience, which, in turn, all support profitability or organisational success as well as quality of life for employees. This creates increased wealth and demand for products and services within the local community, and thus the cycle of economic wellbeing becomes self-sustaining. If everyone acts to support fair employment, everyone benefits from the reciprocal and self-sustaining impact of improved economic wellbeing. 5.2 Implementing the National Living Wage is a cornerstone of how the Council intends to model being a Fair Employer under its’ Fair Employment Charter and how it leads the way around Social Value. Although, there is no current requirement that other employers must adopt the National Living Wage as part of accreditation to the Charter or as part of Council supplier assessment, employers must provide their pay rates and demonstrate, amongst 3 other things, how they are tackling the impacts of low pay to improve the terms and conditions of the lowest paid. It is thus important for the Council to model minimum pay by example. 6 Human Resources Comments 6.1 These are embedded in this report. 7 Equality and Equality Impact Assessments 7.1 With respect to equality, there are significantly more women employed within Grade 1 and the impact for this group is positive. Of those who will move up to SCP 11 if the recommendations of this report are accepted, 87.99% are women and 12.01% are men. Effectively reducing Grade 1 to a single SCP will mean that the average pay, based on Full Time Equivalents, will substantively be £15,207 for both men and women, giving a figure of 100% as the ratio of female pay as a percentage of male pay at this level. Management information for Q 3 this year, shows that, across the organisation women earn only 92.74% of their male counterparts and, at Grade 1, this figure is 98.23%. The recommendations in this report will help to narrow this gap with effect from Q1 2015/16 and so have an immediate positive impact for women across the council. 7.2 A further benefit is that pay ratios between the lowest and highest paid will be bettered. The current ratio highest to the lowest paid employees is 1:11.20. From April 1st 2015, this ratio will improve to 1:10.52. 7.3 The impact is also positive for all groups and protected characteristics since the salary increase will be applied to all, exclusive of trainees and apprentices, who fall below this level. By way of context, the Trades Union Congress (TUC) reported in November 2014 that the Gender Pay Gap between male and female full time employees was 15.7%, which, nationally, represents an average monetary gap of £5,200. Against this backdrop the Council, from April 2015 in particular, will be in a considerably better position. Signed: Dated: 30 March 2015 Cllr A Jabbar, Cabinet Member for Finance and HR Dated: 26 March 2015 4
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