The living wage and its alternatives

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The Living Wage is calculated independently each year by the New Zealand Family Centre Social Policy Unit. It’s based around the concept of establishing the income necessary to provide workers and their families with the necessities of life, such as food, transport, housing and childcare, enabling them to live with dignity and actively participate in society. In other words, it’s based on having enough money to not merely live hand-to-mouth.

But setting wages is always a balancing act between attracting and keeping skilled workers, and what the company can afford to pay.

The Living Wage is a voluntary movement that has been gaining traction in New Zealand over the past few years, with now close to 100 employers committing to being Living Wage employers and treating this as their minimum rate, within their respective businesses.

In New Zealand, nearly 683,000 workers earn less than a Living Wage. For 2018, the “new” living wage has been calculated to be $20.55 per hour, $4.05 more than the minimum wage set by the government. This represents a fairly small increase of only 35 cents more than the 2017 rate and the smallest increase since the concept was first launched back in 2013.

Previously the annual rate has been set according to wage inflation. This year the rate was calculated after a review of the goods and services on which the calculation is based, to ensure it remained realistic and robust. The review utilised data from the Household Economic Survey, as well as new data sources that detail essential family needs, as well as expenses including energy, health, communication and education costs. This calculation is deemed to be more closely reflective of a true living wage within New Zealand.

This new rate also takes account of the significant increases for families with dependent children because of the Government’s Families Package, which is deemed to have softened the impact on households. Without the package, the rate would have been $22.45 – a difference of almost $2.00 an hour.

I’m in full agreement that we need to raise the wage rates in New Zealand, particularly those for low-income earners. However, a balance is needed. For some businesses, especially the small businesses that predominate in New Zealand, simply offering an increase in wages does not always represent a sound business proposition.Each employment case is stand-alone when it comes to setting a wage – whether for differing skill levels and experience, the role itself, time in the industry or company tenure.

What it often comes down to is your employer brand and principles – that is, your reputation as an employer and your value proposition to your employees. Have you ever sat down and thought about what that is exactly? How do you think your company is perceived by your current and prospective future employees?

It’s not always about the money. Yes, paying a fair and equitable hourly rate that takes into account today’s cost of living is necessary. But if a company cannot afford to offer higher wages, there are other benefits that can be considered and are seen as of value by employees in today’s employment market. For example, it’s important to establish what drives your employees – would they value flexible working hours to fit around family or sport? Would it be meaningful for someone in your team to work from home one day a week? Be aware of what drives and motivates them to be successful.

Remuneration doesn’t always need to be in the form of money and indeed can often be more valuable in the form of enhancing their work-life balance, with the added contribution for the employer of increasing your brand among potential employees, productivity, staff retention rates – and more often than not, the bottom line.

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Kellie Hamlett
Kellie Hamlett
Director, Recruitment & HR Specialist, Talent ID Recruitment Ltd. She can be contacted on kellie@talentid.co.nz or 027 227 7736. Talent ID are Recruitment Specialists and can support you through your recruitment process.

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