The Implications for SMEs in Adopting the Living Wage Policy in the UK - Coursework Example

Employee Relations Student Name: Student ID: Date: Table of Contents Introduction 3 a) The Implications for SMEs in Adopting the Living Wage Policy 4 b) Role of UK Trade Unions and other Employee Representatives in Living Wage Discussions within SMEs 5 c) Theoretical Perspective(s) in which the Issues of Minimum Wage Legislation and Living Wage Aspirations Fit 6 Conclusion 8 References 8 Introduction To move a high tax, less wage and high welfare society to a lesser tax, high wage and lesser welfare society, the government is trying its best to make a stance. After the year 2010, more than 2 million jobs are created by the government and currently, it is taking action to provide more gains to lower wage workers. The government has set a National Living Wage on 1st April 2016 [Gov16]. Below is a quick glance of this mandatory legislation: Figure 1: UK Wage Rates Explanation [Liv16] National Living Wage policy is beneficial for the businesses, society and families. It can enhance the quality of work and can reduce the absenteeism as well. There is an impression of this policy on the retention and recruitment. It has increased the commitment of the organization to become an ethical employer. Furthermore, it has lowered the turnover of the contractors by 3% [Liv16]. a) The Implications for SMEs in Adopting the Living Wage Policy If the Small and Medium Enterprises (SMEs) adopt the voluntary living wage policy, which is designed by the Living Wage Foundation [Jus16], in advance of the current or future legislatives then there are several implications that can be inferred. This policy is basically supporting the workers and it is making its contribution in lowering the poverty [Pta15]. The adoption of this policy in the SMEs can influence the number of employees a company can have. The per hour rate in the national minimum wage is lesser than the voluntary living wage policy, which means if a company is following the latter policy, then its expenses will increase and it may recommend that company to lower its number of employees to control the expenses [Dou15]. By adopting the Living Wage Policy, the cash flows of the SMEs can be effected. If a company is a start-up or it is struggling to sustain, then this policy will adversely affect its cash flows [Tho06]. For the smaller companies, the adoption of this policy is not favorable, yet such companies can get assistance from the government in the form of support to establish such business practices [Law13]. However, it can raise productivity in the Small and Medium Enterprises, because the productivity gain is associated with the living wage. Price of the products or the services that are sold by the Small Medium Enterprises will be affected by the adoption of the Living Wage Policy [Tho06]. The living wage policy is not imposed to every single enterprise, yet if any SME applies this policy in the organization, then that SME is encouraged. It depends upon the enterprise that either it affords to pay the living wage or not. Currently, every SME follows the legislations of national minimum wage or the living wage policy [Par14]. If the SMEs adopts the Living Wage policy, then there are chances that the company may get tighter profit margins, due to which they may decrease the number of working hours for employees [Joh12]. For the fulfillment of the job responsibilities, the company may overload the employees with work, which will affect the performance and health of the workers [Pro16]. The attitude and behavior of the employees, in terms of commitment, are positively influenced by adopting such policy [Zha16]. b) Role of UK Trade Unions and other Employee Representatives in Living Wage Discussions within SMEs Trade unions are not common in the SMEs and they are mostly seen in the larger companies. This observation exists in the developed economies as well. However, if there are trade unions in the SMEs, then they can play a significant role [Cro13]. UK Trade Unions and other representatives of the employees can play a vital role in discussing the Living Wages within the Small and Medium Enterprises. For instance, in Vietnam, the labor unions started the wildcat strikes in the year 2006, to increase the wages from the minimum wages to the living wage. Their wage rates were not revised since 1999 [Mil09]. Similarly, in Bangladesh, the trade unions demanded an increase of a living wage, which was lastly set in the year 1994 [Mar07]. Likewise, in Sri Lanka, the trade unions threatened the apparel industry and stipulated for an increase in the living wage [Pra06]. These examples reflect the power of the employee’s representatives within the SMEs to direct the living wage. The implementation of the Living Wage poses several challenges for the stakeholders. In the unfavorable union environment, the labor unions have to face the challenge of implementing such policy that resides in the collective bargaining frameworks [Mil09]. In Ireland, with the support of the government, the trade unions have demanded the small sized business owners to increase the wages. Due to their efforts, in the year 2015, the Minister Brendon Howlin approved the 5% increase in the minimum wages to reach the living wage level [ISM15]. Similarly, the Korean Confederation of Trade Unions made its effort in increasing the wage level higher than the minimum wage rates. 40% of the KCTU members are getting the wages below minimum level [Yun14]. In the low wage UK sectors, there lies those companies that are SMEs. To switch from the minimum living wage to the living wage would be difficult for such SME owners, because of the limited resources [Dav09]. c) Theoretical Perspective(s) in which the Issues of Minimum Wage Legislation and Living Wage Aspirations Fit The issues of the minimum wage legislation and living wage aspirations lies in the Pluralistic theoretical perspective of the Employee Relations, which is also known as Industrial Relations and Employment Relations. The reason is that the trade unions want to increase their wage rate from the minimum wage rate to the living wage legislation. They are struggling and doing their best to employ the living wage policy instead of minimum wage policy. In the pluralistic theoretical perspective, there are two strong groups within an organization, who have different goals and objectives [Gue87]. There is a distribution of the power and authority in the society and there is a conflict between the two major groups, in which the management is unable to close the chapter by coercion. The trade unions are the legitimate representatives of the employees to influence the decisions of the management. This Pluralistic theoretical perspective accepts the loyalties of the employees towards the organizations, which are other than the management of their own. Therefore, the legitimate source of such loyalties is the trade unions [Ros04]. From these points, the issues of the two legislations fit in the pluralistic theoretical perspective. Another theoretical perspective of employee relations is the Marxist Theoretical Perspective, on which the issues of the two wage policies fit. This Marxist Theoretical Perspective is about changing the society and organization by believing in change. Moreover, this perspective covers the social, economic and political areas at the time of changing the society and organization. The reason of this perspective going parallel to the two issues of this report is that the United Kingdom government wanted to reduce the poverty through the living wage policy. In social and economic terms, this step is relevant to the Marxist Theoretical Perspective. An increase in the wage rate, i.e. from minimum wage policy to the living wage policy, will improve and enhance the lifestyle of the workers. It will affect the performance of the organizations that will influence the economic dimensions of the country [Ros04]. From these points, the issues of the two legislations fit into the Marxist Theoretical Perspective. Conclusion The government has set a National Living Wage on 1st April 2016 and according to this legislation, the minimum wage rate is £6.70 for the age group 21-24, the minimum wage rate is £7.20 for the age group of 25 and above, the living wage rate across the United Kingdom is £8.25 and the living wage rate in London is £9.40. The minimum wage is a law and it has to be followed by every single entity. Yet, the living wage is not a law and it is applied on the voluntary basis in the organizations. The Small and Medium Enterprises do not have much resources to apply the living wage as their payment method. Yet, the trade unions in several countries, including the United Kingdom have struggled for increasing their wages from the minimum wage policy in the organizations that have adequate resources. The performance of an organization and employees is positively affected by the living wage legislation. It affects the society, families and the businesses. The issues of the minimum wage policy and living wage policy are fit into the two perspectives of the employee relations. One is the Pluralistic Theoretical Perspective and the other is the Marxist Theoretical Perspective. References Gov16: , (Government UK, 2016), Liv16: , (Living Wage Organization, 2016), Jus16: , (Tallis, 2016), Pta15: , (Ptashnick & Zuberi, 2015), Dou15: , (Pyper & Mirza-Davies, 2015), Tho06: , (Thompson & Chapman, 2006), Law13: , (Lawton & Pennycook, 2013), Tho06: , (Thompson & Chapman, 2006; Lawton & Pennycook, 2013), Par14: , (Parliament UK, 2014), Joh12: , (Park, 2012), Pro16: , (Prowse & Fells, 2016), Zha16: , (Zeng & Honig, 2016), Cro13: , (Croucher, et al., 2013), Mil09: , (Miller & Williams, 2009), Mar07: , (Hearson, 2007), Pra06: , (Prasanna & Gowthaman, 2006), ISM15: , (ISME, 2015), Yun14: , (Yun, 2014), Dav09: , (Coats, 2009), Gue87: , (Guest, 1987), Ros04: , (Rose, 2004), Read More