Our thinking

Time to pay up

12 May, 2023

Just over a year has passed since we wrote an article about the importance of pay, and how it is all too frequently overlooked as a marker of responsible business, despite its foundational importance. In recent months, the cost-of-living crisis, industrial action and ever-rising inflation have focused our minds even more squarely on the issue, particularly as corporate profits break records in some sectors, and executive pay continues to rise.

So it was with interest that we saw Paul Johnson, of the Institute for Fiscal Studies writing about this very issue in The Times. His main focus was on the fact that despite there being record numbers in employment, around 60% of people living in poverty are either employed or live with someone who is in work.

We continue to believe strongly that business that rely on poverty-level wages to remain profitable simply don’t have a viable business model.  Businesses have a responsibility to pay their employees enough money to live on and this responsibility also extends to those that facilitate the success of a business, namely contractors and workers throughout a business’s supply chain. This might sound blindingly obvious, but it remains the case that a high proportion of businesses publish extensive impact reports without mentioning in-work poverty and what they do to prevent it.

Johnson also brings up another area we are focused on – pay progression. As he writes: “Too many people are left with little scope to progress to better paid or more fulfilling work.” We called this ‘scope 2’ in our vision of a new pay protocol (with ‘scope 1’ focused on wages). Employers can and should engage with their workers to overcome the barriers that exist to pay progression so that as many people as possible have the chance to progress out of low pay roles.

Paying fairly isn’t just the right thing to do, or just a way of meeting stakeholder expectations, but is a necessary investment in business success. Creating a positive pay environment helps create a positive working environment. When people feel they are paid fairly they are more likely to contribute their best, remain loyal, support each other, and stick around. Individuals reap these benefits, and so do the organisations they make up.

By Jovontae Catline