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Paying the Living Wage can lead to better staff retention and reduced absenteeism, new report reveals

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Employers who pay the Living Wage help to create a ‘feel good factor’ in the workplace resulting in increased productivity, an official report drawing on research from Loughborough University reveals.

Reduced absenteeism, reduced staff turnover and an enhanced company reputation have also been outlined as potential benefits in the report – Wider Payment of the Living Wage in Scotland – which was carried out by the University’s Centre for Research in Social Policy (CRSP) and Ipsos MORI on behalf of the Scottish Government.

The Living Wage is calculated by CRSP to reflect its calculation of the Minimum Income Standard (MIS) required for a worker to meaningfully participate in society. It is based on the Centre’s detailed research into the types of goods and services members of the public think are needed to reach a socially acceptable standard of living. The Scottish Government has committed to paying the Living Wage as part of its public sector pay policy.

Donald Hirsch, Director of CRSP and co-author of the report, said: “Our research at CRSP on what households need for a minimum living standard has been used to set the UK Living Wage, which is being adopted by employers all over the country.

“The Scottish Government has taken up the Living Wage and wants to go further in promoting it north of the border. Our latest research, commissioned by the Scottish Government, looks at international evidence of what has happened when living wages have been set. This has been broadly encouraging, showing that the Living Wage tends to benefit workers and employers without destroying jobs. This is influencing the Scottish Government in seeking to ensure that as many employers as possible in Scotland, both public and private, pay their workers enough for them to afford a decent standard of living.”

Cabinet Secretary for Fair Work, Skills and Training (Scotland) Roseanna Cunningham added: “This is a fascinating report which, on the whole, offers a very positive outlook on the benefits of paying the Living Wage. 

“As well as the more obvious benefits to individuals receiving higher pay, I hope the findings on improved rates of absenteeism and better productivity help convince employers, not already on board with the Living Wage, that it could be a very positive step for their business. 

“A number of respondents also mentioned the reputational benefits of being a Living Wage employer, including reinforcing their positioning as ethical and socially responsible businesses. 

“The Scottish Government is committed to fairness, supporting those on the lowest incomes, and we recognise the real difference the Living Wage can make to the people of Scotland. We have been working closely with the Poverty Alliance to encourage every employer to ensure all staff receive a fair level of pay. The Fair Work Convention, which meets for the second time today, is looking at a number of ways to improve workplace relations and productivity, with fair pay seen as key to their work. 

“But employers paying the living wage is only half the story here. The tax and benefits system needs to work smarter to make sure that people on low incomes see a greater share of any increases in pay – and we will press the UK Government to make sure this happens.” 

The report is available to view here.