Fair Work First - conditionality in public sector grants: business and regulatory impact assessment

Annex D: Summary of Options Considered

Real Living Wage

Option 1 – Maintain the Status Quo by Keeping Apprentices and 16-17 Year Old Workers Within Scope of the rLW Condition

Benefits:

• Maintains the policy intent to improve pay for all workers, regardless of age and status, across Scotland.
• Positive financial impacts for apprentices and 16-17 year old workers and the wider workforce due to knock-on impacts on pay differentials when uplifting the lowest paid groups of workers to the rLW, which is higher.
• Potential to make apprenticeships more attractive to people new to and already in the workforce due to a rate of pay higher than the statutory minimum.
• Potential for a reduction in poverty due to higher pay reflective of the cost of living.
• Potential positive impacts on morale, wellbeing, family life, and relationships for workers uplifted to rLW.
• Potential for organisations not meeting the condition in full to not receive public funding.

Challenges:

• Affordability for organisations due to higher wage costs, including national insurance and employer pension contributions.
• Maintaining wage differentials if uplifting the lowest paid groups of workers to the rLW.
• Economic context, including cost of doing business.
• Reduction in the number of apprenticeship and 16-17 year old worker opportunities.
• Risk of lowering competitiveness, for example, by passing on increased costs.
• Potential costs associated with the administrative burden on funders and grant applicants to consider and request an exception for apprentices and/or 16-17 year old workers.
• Potential reduction in the number of organisations applying for grants.
• Inconsistent with the Living Wage Employer Accreditation Scheme, which does not align with the groups of workers the Living Wage Foundation sets the rLW for (i.e., workers aged 18 and over, not including apprentices).

Option 2 – Remove Apprentices from the Scope of the rLW Condition

Benefits:

• Positive financial impacts for 16-17-year-old workers who get an uplift to at least the rLW and for the wider workforce due to the knock-on impact on pay differentials.
• Potential positive impacts on morale, well-being, and family life and relationships for workers uplifted to rLW.
• Limits the risk of a reduction in apprenticeship opportunities.
• Employers not already paying apprentices the rLW would not have to restructure company-wide pay schemes to ensure appropriate wage differentials.
• No additional costs to pay apprentices at least the rLW, nor consequential costs to restructure company-wide pay schemes.
• No additional costs on employers to pay increased national insurance contributions and employer pension contributions.
• No additional administrative burden to consider or request an exception for apprentices.
• Alignment with the Living Wage Employer Accreditation Scheme.

Challenges:

• Does not maintain policy intent to improve pay for all workers regardless of age or status across Scotland.
• Affordability concerns due to higher wage costs.
• Maintaining wage differentials if uplifting 16-17-year-old workers to the rLW.
• Economic context, including the cost of doing business.
• Risk of reduction in the number of 16-17-year-old worker opportunities.
• Risk of lowering competitiveness due to passing on increased costs.
• Potential reduction in the number of organizations applying for grants.
• Inconsistent with the rLW Employer Accreditation Scheme.

Mitigation of Challenges:

• Availability of a limited exception to the rLW condition where it would be genuinely unaffordable for an organization to pay at least the rLW to 16-17-year-old workers.
• SG to monitor the use of the exception mechanism to ensure it is not being used disproportionately.
• SG to continue to review evidence requirements and administrative processes, engaging with stakeholders accordingly.

Option 3 – Remove 16-17-Year-Old Workers from the Scope of the rLW Condition

Benefits:

• Positive financial impacts for apprentices who get an uplift to at least the rLW and for wider workforce due knock on impact on pay differentials as a result of uplifting apprentices to the rLW which is higher.
• Potential to make apprenticeships more attractive to people new to and already in the workforce due to a rate of pay higher than the statutory minimum.
• Potential for a reduction in poverty due to higher pay reflective of the cost of living.
• Potential positive impacts on morale, wellbeing and family life and relationships for apprentices uplifted to rLW.
• Limits the risk of a reduction in apprenticeship opportunities.
• No additional costs associated with the potential admin burden to consider or request and exception for 16-17 year old workers.
• Employers not already paying 16-17 year old workers the real Living Wage would not have to restructure company-wide pay schemes to ensure appropriate wage differentials.
• No additional costs to pay 16-17 year old workers at least the real Living Wage, nor any consequential costs to restructure company-wide pay schemes.
• No additional costs on employers to pay increased national insurance contributions and employer pension contributions.
• No additional costs associated with the potential admin burden to consider or request and exception for 16-17 year old workers.
• Alignments with Living Wage Employer Accreditation Scheme.

Challenges:

• Does not maintain policy intent to improve pay for all workers regardless of age or status, across Scotland.
• Affordability for organisations due to higher wage costs, including national insurance and employer pension contributions.
• Maintaining wage differentials if uplifting apprentices, likely one of the lowest paid groups of workers, to the rLW.
• Economic context, including cost of doing business.
• Reduction in the number of apprenticeship opportunities.
• Risk of lowering competitiveness, due to for example passing on increased costs.
• Potential reduction in the number of organisations applying for grants.
• Does not align with the groups of workers the Living Wage Foundation sets the rLW for, i.e. workers aged 18 and over, not including apprentices.

Mitigation of Challenges:

• The availability of a limited exception to the rLW condition where it would be genuinely unaffordable for an organisation to pay at least the rLW to 16-17 year old workers in its workforce.
• SG to monitor use of the exception mechanism to ensure it is not being used disproportionately. (Current admin data indicates a small proportion of employers are applying for exceptions.)
• SG to continue to keep under review the related evidence requirements and associated admin processes, engaging with stakeholders accordingly.

Option 4 – Remove Apprentices and 16-17-Year-Old Workers from the Scope of the rLW Condition

Benefits:

• Maintains consistency with Living Wage Employer Accreditation Scheme.
• Limits the risk of a reduction in apprenticeship and 16-17 year old worker opportunities.
• Reduces the potential admin burden on funders and grant applicants who would otherwise have to consider and request an exception for apprentices and / or 16-17 year old workers in their workforce.
• Employers not already paying 16-17 year old workers the real Living Wage would not have to restructure company wide pay schemes to ensure appropriate wage differentials.
• No additional costs to pay 16-17 year old workers at least the real Living Wage, nor any consequential costs to restructure company wide pay schemes.
• No additional costs on employers to pay increased national insurance contributions and employer pension contribution.
• No additional costs associated with the potential admin burden to consider or request and exception for 16-17 years old worker.
• Consistency with the Living Wage Employer Accreditation Scheme.Limits the risk of a reduction in apprenticeship and 16-17-year-old worker opportunities.
• Reduces administrative burden on funders and grant applicants.
• No additional costs or restructuring requirements for employers.

Challenges:

• Does not maintain policy intent to improve pay for all workers regardless of age or status, across Scotland.
• Does not result in any potential positive financial impacts for apprentices or 16-17 years old workers and wider workforce due to pay differentials.
• Potential for higher quality apprenticeship opportunities, including higher pay.
• Potential to make apprenticeships more attractive to people new to and already in the workforce.
• Potential for a reduction in poverty due to higher pay reflective of the cost of living.

Mitigation of Challenges:

• SG to continue to keep under review the related evidence requirements and associated admin processes, engaging with stakeholders accordingly.
• SG to continue to encourage payment of rLW to all workers regardless of age or status, across Scotland but will not require payment of at least the rLW to apprentices and 16-17 year old workers as part of the rLW condition

Effective Voice

Proposal – Maintain the Status Quo

(Applying the effective voice condition to recipients of public sector grants)

Benefits:

• Maintains commitment to effective voice in the workplace.
• Ensures workers have an effective voice through appropriate channels.
• Provides opportunities to formalize existing voice channels.
• Admin costs associated with evidencing the condition.
• Potential costs associated with delivering voice channels (either in terms of resource or additional spend), for example, trade union facility time or designing and conducting an employee survey.
• Lack of understanding of the term effective voice and how this might be implemented in an organisation, particularly smaller organisations.
• Confusion around the process of evidencing the condition, including sign off by a trade union or worker representative.

Challenges:

• Admin costs associated with evidencing the condition.
• Potential costs associated with delivering voice channels (either in terms of resource or additional spend), for example, trade union facility time or designing and conducting an employee survey.
• Lack of understanding of the term effective voice and how this might be implemented in an organisation, particularly smaller organisations.
• Confusion around the process of evidencing the condition, including sign off by a trade union or worker representative.

Mitigation of Challenges:

• Amendments to the evidence process aimed at reducing the admin burden on both grant applicants.
• SG to continue to keep under review the related evidence requirements and associated admin processes, engaging with stakeholders accordingly.