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

4. Options

Four options were considered regarding rLW condition. While effective voice condition was also considered due to its importance to the delivery of Fair Work more broadly, removing it from the scope of the conditionality was not exploredInstead, options for mitigating impact were considered. The options for the rLW and effective voice are considered t below in Tables 7 and 8 respectively.

Table 7: Real Living Wage Condition Options

• Option 1: Maintain the status quo by keeping apprentices and 16-17 years olds in scope of the rLW condition.
• Option 2: Remove apprentices from the scope of the rLW condition.
• Option 3: Remove 16-17 year olds from the scope of the rLW condition.
• Option 4: Remove both apprentices and 16-17 year olds from the scope of the rLW condition.

Mitigation

• Option 1 – The policy design continues to include the scope for funders to agree a limited exception to meeting the rLW condition in full, as explained in Section 2.1.3 above.
• Option 1-3 – 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.)
• Option 1-3 – SG to continue to keep under review the related evidence requirements and associated admin processes, engaging with stakeholders accordingly.
• Option 2-3 – The policy design continues to include scope for funders to agree a limited exception to meeting the rLW condition in full, as explained in Section 2.1.3 above.
• Option 4 – 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.

Table 8: Consideration of the Effective Workers' Voice Condition

• Proposal: Maintain the status quo by continuing to apply the effective workers’ voice condition to recipients of public sector grants.

• Mitigation: Amend process for evidencing and confirming effective workers’ voice as part of grant application stage to reduce the administrative burden on grant applicants/recipients.

4.1 Sectors and Groups Affected

The BRIA exercise has identified the following groups who may be affected by these activities. These include:

• Organisations in receipt of public sector grants who employ 16-17 year olds and / or apprentices;
• Third party organisations who employ 16-17 year olds and / or apprentices who are engaged on grant funded activity;
• Issuers of public sector grants;
• Apprentices who are not currently paid at least the rLW, employed by grant recipients or by third party organisations where they are in engaged on grant funded activity;
• 16-17 year olds who are not currently paid at least the rLW, employed by grant recipients or by third party organisations where they are in engaged on grant funded activity;
• Organisations in receipt of public sector grants, who are required to introduce effective workers’ voice channels at either or both a collective or individual level or enhance existing channels;
• Employees of grant recipients that are required to introduce effective workers’ voice channels at either or both a collective or individual level or enhance existing channels.

The impacts for each of these groups under the options considered are outlined below.

RLW Conditions Option 1: Maintain Status Quo

Organisations in receipt of or seeking public sector grant support who employ 16-17 year olds and / or apprentices are required to provide evidence of compliance with this aspect of FWF conditionality. They are also required to pay affected staff and apprentices at least the rLW. There is provision in the policy for a limited exception where it is unaffordable for an organisation to pay the rLW to all or part(s) of its workforce.

Under the status quo, FWF acknowledges that meeting the rLW condition may create additional cost to employers currently not paying all their workers at least this rate. As such, any organisation choosing to access a public sector grant may incur administrative costs associated with demonstrating compliance with this conditionality, or with evidencing their need for an exception.

The organisation may also incur additional salary and labour costs associated with increasing the salaries of apprentices and / or 16-17 year old workers to the rLW, unless an exception is approved.

There may also be knock-on impacts on the organisation’s labour costs, if the employer elected to amend pay and conditions for the wider workforce to maintain wage differentials with apprentices and 16-17 year old workers. However, this would depend on decision-making within the organisation around its staff recruitment, retention, and pay policies.

Issuers of public sector grants may incur administrative costs through reviewing grant applications and exception requests.

Apprentices who are not currently paid at least the rLW and are employed by grant recipients, would receive additional salary unless their employer has an approved exception to this condition. They may also be affected by recruitment and retention decisions made by employers who anticipated employing apprentices in future.

16-17 year olds who are not currently paid at least the rLW and are employed by grant recipients, would receive additional salary unless their employer has an approved exception to this condition. They may also be affected by recruitment and retention decisions made by employers who anticipated employing 16-17 year olds in future.

The sections below summarise available information indicating the potential scale of those affected by maintaining the status quo.

Information on apprentices and 16-17 year olds in the labour market along with low pay sectors is included in Annex A – Labour Market Overview. However, there is currently no data which captures the number of apprentices and 16-17 year olds earning under the rLW who are employed in grant recipient organisations.

Option 2-4

Option 2 - Remove apprentices from the scope of the rLW condition

Removing apprentices would result those apprentices who are currently earning less than the rLW, remaining on that level with no uplift. Employers would not incur additional admin costs regarding compliance with regard to uplift of related salaries. 16-17 year old workers earning below rLW would receive an uplift in pay.

Option 3 - Remove 16-17 year olds from the scope of the rLW condition

Removing 16-17 year old workers would result those apprentices who are currently earning less than the rLW, remaining on that level with no uplift. Employers would not incur additional admin costs regarding compliance with regard to uplift of related salaries. Apprentices earning below rLW would receive an uplift in pay.

Option 4 - Remove Both Apprentices and 16-17 Year Olds From the Scope of the rLW Condition

Removing both would result in these groups of workers currently earning less than the rLW, remaining on that level with no uplift. Employers would not incur additional admin costs regarding compliance or with regard to increased salaries.

Consideration of the Effective Workers’ Voice Condition

Maintain the status quo by continuing to apply the effective workers’ voice condition to recipients of public sector grants may impact employers who need to establish a mechanism for effective voice if one does not already exist. Workers may also be affected through having a more effective voice.

4.1.1 Businesses/Sectors in Receipt of Grant Funding

A partial picture of the numbers of grants with Fair Work Conditionality is available from the Scottish Government. Around 3,900 grants were awarded by public organisations between July 2023 and March 2024. These were identified via a specific data gathering exercise by Scottish Government officials, and may understate the overall level of grants issued during this period. However, the extent to which these grant recipients are unique organisations, and employ either 16-17 year olds and / or apprentices and would therefore be affected by this conditionality, is unclear: there are no national sources of information which capture the profile of all businesses receiving grants.

An estimate of the upper bound of the number of businesses affected by this dimension of FWF conditionality can be made using data from the Small Business Survey Scotland 2022-23. This found that in 2022-23 around 10% of Scottish SMEs respondents reported accessing Government (from either the UK or Scottish Governments) or Local Authority grants/schemes as a source of finance in 2022-23, Table 9. If those proportions were applied to the number of businesses with between 1-249 employees in 2024, it would suggest that around 10,600 businesses would be in receipt of grant or scheme funding of some description. This would include around 8,500 businesses with 1-9 employees; around 2,200 businesses with 10-49 employees; and around 750 businesses with 50-249 employees.

The portion of businesses reporting use of grants increases by size of organisation with larger businesses more likely to report this. SME’s in the Information / Communication sector were most likely to report grants/schemes as a source of finance – 20% in 2022-23. As the conditionality relates to those employing 16-17 year olds and/or apprentices: it is unclear the extent to which these businesses employ these members of staff, particularly in the Information & Communications sector.

The Small Business Survey Scotland 2022-23 also found that 80% of SME’s paid at least the rLW (£10.90) at the time of the survey. While this will vary by sector it suggests that potentially a high proportion of SMEs accessing grants are already paying employees the rLW. Further information is available in Annex A on rLW coverage and SME’s who pay employees more than the rLW.

Table 9: SMEs: % businesses reporting Government or local authority grants or schemes (excluding any related to coronavirus) as a type of finance currently used, Scotland 2022-23

% businesses reporting grants/schemes as a source of finance
Scotland Total	10%
Size
1-9	10%
10-49	13%
50-249	19%
Sector
Primary	13%
Manufacturing	10%
Construction	8%
Transport/Retail/Distribution	5%
Information/Communication	20%
Business Services	7%
Administrative Services	4%
Other Services	31%

Source: Small Business Survey Scotland 2022-2023 Table H3

4.1.2 The Application of Conditionality and Use of a Limited Exception to the RLW Condition in Public Sector Grants

To understand the application of conditionality in the first year of implementation, and the extent to which a limited exception has been approved, Fair Work Policy officials issued an information request to public sector funders in Spring 2024. This requested returns covering administrative data between July 2023 - March 2024.

In addition to all Directorates across the Scottish Government, this request was sent to 127 public bodies, of which 42 responded. Of these 42 public bodies, 15 bodies provided data on grant spend and 27 provided a nil return. The request was also sent to the 32 local authorities, of which 8 responded. The information gathered therefore does not represent a complete picture of each and every grant awarded by the public sector.

Based on the responses, an overview of the data is set out in Tables 10-12. This breaks down the number of grants, their value, and the number of exceptions that were agreed. It also lists the sectors where exceptions were approved and confirms to which part/s of the workforce the exception applies.

Table 10: Breakdown of grants awarded and exceptions approved in period 1 July 2023 - 31 March 2024

Number		Value (£ million)
Grants awarded	3,914	2,671.4
Exceptions to the rLW condition approved	199	272.2
Declined exception requests	12	n/a

Source: Scottish Government request for information from funding organisations across the public sector in Scotland (May 2024) Fair Work First: grants awarded - July 2023 to March 2024 - gov.scot

Note: n/a - not applicable

Table 11: Breakdown of organisations with an approved exception by sector

Sector	Number
Public	24
Private	52
Third	16
Not reported	50
Total	142

Source: Scottish Government request for information from funding organisations across the public sector in Scotland (May 2024) Fair Work First: grants awarded - July 2023 to March 2024 - gov.scot

Note: an organisation may receive more than one exception

Table 12: Breakdown of approved exceptions for parts and whole of the workforce

Workforce	Number
Part	145
Whole	1
Not reported	53

Source: Scottish Government request for information from funding organisations across the public sector in Scotland (May 2024) Fair Work First: grants awarded - July 2023 to March 2024 - gov.scot

This data is a partial picture grants awarded and exceptions. However, it potentially indicates that a small portion of organisations that had grants awarded applied for exceptions to rLW condition, suggesting a small portion of businesses seeking grant funding had incurred admin costs associated with the exception process.

4.1.3 Potential Numbers of 16-17 Year Olds and Apprentices Within Scope of Measures

16-17 Year Olds

There is relatively limited timely data on numbers of 16-17 year olds employed in the labour market. In addition, household surveys like the Annual Population Survey tend to report data for the 16-24 year old age bracket.

Data from Scotland’s Census for 2022 gives snapshot data of numbers of people aged 16-17 in employment at the point at which the Census was taken. This suggests there were around 113,000 16-17 year olds in Scotland in March 2022, of whom around 49,700 were in employment^[12]. Of these, around 19,400 (39 per cent) were employed in Accommodation and Food Service Activities; around 11,200 (23 per cent) were employed in Wholesale and Retail, Repair of Motor Vehicles etc; and around 2,600 (5 per cent) were employed in Arts, Entertainment and Recreation. While individual organisations within these sectors may seek to access grants from public sources, this may suggest that the majority of 16-17 year olds in employment may be in sectors that may not tend to seek grants.

The Census also indicates that around:

• 2,300 16-17 year olds were employed in Manufacturing;
• 2,800 were employed in Construction;
• 2,100 were employed in Human Health and Social Work activities;
• 1,500 were employed in Administrative and Support Services; and,
• 1,500 were employed in Education.

These may give a broad order of scale of the subset of employed 16-17 year olds who might fall within eligibility, should the organisations they are employed by seek a public sector grant with FWF conditionality applied. However, these activities may also overlap with Apprenticeships.

Apprentices

Apprentices in scope for rLW conditionality are those employed by employers in receipt of a public sector grant or who are involved directly with the grant funded work if working for a third party organisation.

Annex A, Table A.5 indicates, 25,365 Modern Apprenticeships started in 2023/24. Of these, around 40 per cent (10,130) were in the 16-19 age group. These numbers and proportions were similar to those seen in 2022/23.

Overall, there were 38,607 Modern Apprenticeships in training in 2023/24, a similar number to that seen in 2022/23. Around 50 per cent of these (19,413) were aged 16-19.

Data set out in Annex A illustrates, around 25 per cent of starts and one third of those in training were in Construction occupations; around 14 per cent of those in training were in Engineering & Energy, and around 7 per cent were in Automotive occupations. Around 17 per cent of those in training were in Sport, Health and Social Care occupations, with higher proportions of starts.

Annex A sets out, around one in six of Scottish employers offered formal apprenticeships in 2022, with larger proportions of employers offering apprenticeships among those with larger workforces to begin with.

4.2 Costs

4.2.1 Direct Costs Associated with Real Living Wage Change for 16-17 Year Olds and Apprentices

As illustrated in Section 2.1.4, 16-17 year olds have a lower minimum wage than 18-20 year olds, and lower than those aged 21 or over. Apprenticeship pay rates also vary across sectors and occupations; by age; and by length of training time completed. Starting apprenticeship salaries may be above the current statutory minimums.

Short Run Impacts on Employers of 16-17 Year Olds

It may be the case that some current and newly starting apprentices would experience notable uplifts in their salaries. However, the census data outlined above suggest that the majority of 16-17 year olds in employment are in sectors that may not tend to seekgrants. This would suggests that a limited numbers of 16 -17 year olds in employment would be impacted. A number of these individuals may also l be undertaking Apprenticeships.

Short Run Impacts on Employers of Apprentices

As part of this aspect of FWF conditionality, it may be the case that some current and newly starting apprentices would experience notable uplifts in their salaries. The scale and extent of the uplift would depend on their age and level of experience; their area of occupation; and the prevailing wage rates for their level of experience. It will also be influenced by whether the organisations in question seek and obtain an exception.

Illustrative Examples of Impact on Salary Costs

Owing to data constraints outlined above, it is currently challenging to estimate the overall quantum of cost increases to employers in the short-run. The BRIA presents illustrative examples of cost increases from increases in salary costs for individuals in the grant recipients’ organisation age 16-17 or apprentices currently in receipt of the statutory minimum wage rates for 2023-24 to the rLW rate as at October 2023^[13]. This is the primary direct cost associated with real Living Wage conditionality. As previously highlighted, how this impacts on an organisation will be dependent on a number of factors including, the number of individuals earning under the rLW currently employed, their current wage rate and its differential from the rLW

The Scottish Government does not hold data on the number of individuals who would be affected by this change, and it is therefore not possible to estimate the overall increase in wages associated with these groups to grant recipients. However, Table 13 below provides an overview of how much of an uplift from a move to rLW in gross wages an individual would receive in 2023/24 under the following assumptions:

• Assumed the individual was earning either the National Living or Minimum Wage rates (as of April 2024, Table 1 above) for their age group
• based on the rLW rate as of October 2023 and the statutory minimum wage rates for 2023-24. Note that these wage rates will increase in future years.
• Individuals are paid for full time work, working 37 hours per week for 52 weeks per year across all age groups.
• Apprentices aged 19 and over who have completed the first year of their apprenticeship^[14].
• Monthly and annual wages are rounded to the nearest pound.

Table 13: Uplifts in gross pre-tax pay for each wage group from legal minimum to real Living Wage for individual working 37 hours a week, by hour, month and year

Wage Group	Annual wage at statutory minimum wage	Annual Wage at rLW	Increase in wages if moved to from a statutory minimum wage to a rLW
			Hourly Uplift	Monthly Uplift	Annual Uplift	Uplift %
16 – 17	£12,314	£23,088	£5.60	£898	£10,774	87.5%
18 – 20	£16,546	£23,088	£3.40	£545	£6,542	39.5%
21 & over	£22,011	£23,088	£0.56	£90	£1,077	4.9%

Apprentice Rates, by age group

Wage Group	Annual wage at statutory minimum wage	Annual Wage at rLW	Increase in wages if moved to from a statutory minimum wage to a rLW
			Hourly Uplift	Monthly Uplift	Annual Uplift	Uplift %
Under 19 or in first year of apprenticeship	£12,313	£23,088	£5.60	£898	£10,774	87.5%
19 – 20*	£16,546	£23,088	£3.40	£545	£6,542	39.5%
21 & over*	£22,011	£23,088	£0.56	£90	£1,077	4.9%

Source: Scottish Government analysis

* where they have completed the first year of their apprenticeship

Table 13 highlights that the largest uplift in wages of £10,774 before tax would be seen for individuals aged 16-17 years old, apprentices aged under 19 or those in their first year of apprenticeship (i.e., those employees earning the lowest National Minimum Wage rate. These groups would experience their gross salary nearly doubling as a result of this change, although net pay would increase by a lesser amount due to their pay now surpassing the income tax personal allowance threshold. Apprentices aged 21 and over would receive the smallest uplift of around £1,077 before tax.

Employers would see the largest increase in direct costs associated with individuals who are aged 22 or over and in their first year of their apprenticeship. This is due to increased National Insurance Contributions (NICs) and the auto enrolment to employer pension schemes in addition to the wage increase. At the time of this analysis employers are not subject to National Insurance contributions (NICs) on weekly earnings below £967 (equivalent to annual earnings of £50,270) for employees under 21 years old.^[15] While some employers may contribute to pensions for all staff auto-enrolment to workplace pension schemes is only compulsory for employees aged between 22 years old and State Pension age and earning more than £10,000 per year at a minimum rate of 3%.^[16]

The direct financial costs of this policy only impacts employers who are in receipt of grants and are not eligible for an exception. These employers may choose to reduce the number of apprentices or workers aged under 18 that they currently employ or choose to not hire these workers in future. However, the number of employers that receive grants is a minority and the impact on overall employment is unlikely to be substantive at the national level.

Current data on Apprenticeship starts indicates that there has been no significant decrease in the overall number of MA starts since grant conditionality was introduced, Table 3.

These increased costs were identified as a concern within the survey. Local authorities who responded to the survey mentioned affordability as a potential challenge to meeting rLW conditionality. The current context of local authority budgetary pressures was also cited, with specific reference to the difficulty of needing to make savings whilst also being required to meet increased wage costs simultaneously in order to meet FWF conditionality.

Under the status quo (option 1), the impact on the costs to pay apprentices and 16-17 years old workers at least the rLW and other costs associated with ensuring appropriate wage differentials would be considered in any request for a limited exception. Such requests require to explain why it is genuinely unaffordable using suitable evidence regarding the organisation’s current financial position, the costs of uprating the pay of that part (or parts) of the workforce and any consequential or additional costs. Where a funder is satisfied that the potential grant recipient genuinely cannot afford to pay either or both apprentices and 16-17 years old workers the rLW they may agree a limited exception, meaning that there would be no additional cost to the wage bill as a result of the grant in question.

Longer Run Impacts on 16-17 Year olds and Apprentices

Under the status quo, costs may evolve over time. In part, the scale and extent of impacts in future years will be influenced by decision-making around employing 16-17 year olds and apprentices among individual employers seeking a public sector grant.

Impacts will also be influenced by future decision-making on minimum wages and the National Living Wage. In particular in its updated remit for the Low Pay Commission (LPC), announced in July 2024, the UK Government tasked the LPC with reducing the gap in National Minimum Wage age bands for adults in order to achieve a single adult National Living Wage^[17]. They were also tasked with ensuring other National Minimum Wage rates (under 18 and apprentice rates) are set as high as possible. Any narrowing of the gap between the NMW/NLW and rLW will reduce costs associated with compliance with the rLW condition.

4.2.2 Indirect Costs Associated with Real Living Wage Options

Uplifting wages may also have indirect effects for grant recipients. Survey responses indicated concerns among some employers for the potential for additional costs from restructure pay and reward schemes in order to maintain appropriate wage differentials for existing staff across the organisation.

This is not considered a direct, ‘first round’ cost from the FWF policy, as it stems from employer decision-making following their decision to seek apublic sector grant and comply with FWF conditionality, including in relation to apprentices and 16-17 year olds.

Existing evidence suggests the potential for this impact may be unclear. Analysis from the Institute for Fiscal Studies (IFS) indicates that increases to the National Living Wage have resulted in wage compression, particularly in firms that employ larger proportions of their workforce at relatively low rates of pay (i.e., close to the National Living Wage rate), and these firms have typically responded by increasing the pay of employees who are within £2.00 above the NLW rate.^[18] While not directly related to rLW uplifts, research from the Low Pay Commission^[19] (LPC) on the effect of the National Living Wage on wage differentials and compression suggests that whilst concerns over maintaining wage differentials were the primary concern of firms in response to an increase in the NLW, fewer businesses increased wage differentials as a response to the 2023 NLW uplift than in 2019.

The extent to which this would become a challenge for individual employers who choose to seek relevant public sector grant support will be influenced by the share of apprentices or 16-17 year olds they employ as part of their existing workforce, and existing wage differentials. Scope for impacts may be greater in organisations with larger numbers of those affected, and larger pay disparities.

4.2.3 Administrative Costs Associated with Exceptions

As previously highlighted, the policy design for rLW conditionality includes - as a necessary element for maintaining appropriate proportionality - the scope for funders to consider the affordability for potential grant recipients in meeting the condition. However, the process of requesting and considering a limited exception in itself may have a cost attached. With some survey respondents and interviewees highlighting the additional administrative burden on grant recipients to compile and present their case to support their request for an exception and grand funders to consider such requests.

4.2.4 Costs associated with RLW Conditions options 2 - 4: Remove Apprentices and / or 16-17 Year Olds from Fair Work First Criteria

The costs associated with options 2 and 3 are potentially less than under option 1 as rLW conditions are removed from some of the groups. There are no costs to business associated with option 4 as it removes the condition for both 16-17 year olds and apprentices completely. As outlined above we are unable to estimate the number of apprentices or 16-17 year olds who are affected by this conditions. However, based on analysis of the Census data, it is expected removing 16-17 year olds from the rLW conditionality would not substantially effect the BAU position given the low numbers expected to be employed in sectors which may be in receipt of a public sector grant. A larger reduction in costs from business as usual may be seen under option 2 as it is estimated that there may be more apprentices are likely affected by this policy than 16-17 year old workers. Administration costs will also be reduced, compared to business as usual, for those organisations that would no longer need to apply for an exception.

4.2.5 Summary of Costs associated with real Living Wage options

The costs associated with this policy will fall on those applying for public sector grants who currently employ apprentices or 16-17 year olds, with some second order impacts on grant funders where there is increased applications for exception. While data on the number of organisations across each sector who apply for grants is not held, this will not affect the majority of organisations in Scotland

The potential costs associated with meeting the rLW condition may pose challenges for some employers which would prohibit them from accessing a grant. The scale of these potential costs will be driven by the composition of their workforce and pay scales and will vary by organisation. Overall Option 1, the current position, is likely to see the most organisations and individuals affected, and highest level of costs. However, this will reduce under options 2 and 3 as the conditions are removed from apprentices and young people, and would be removed completely under option 4.

4.2.6 Costs Associated with the Effective Workers’ Voice Condition

The option for organisations to request a limited exception on ground of affordability helps mitigate this issue and may mean a grant can be awarded without the recipient having to meet the rLW conditionality in full. Although it is noted that the exception process does pose an administrative burden on those that apply this is current practice and does not solely apply to those with employees aged 16 to 17 or apprentices.

In respect of the effective voice condition, no quantifiable costs were identified. However, there may be costs associated with the administrative burden on grant applicants to evidence they meet the condition, an issue raised by stakeholders.

Where an employer needs to establish a mechanism for effective voice if one does not already exist, there would be a cost associated with this activity. Respondents to the survey highlighted staff and management time and costs, particularly for smaller businesses and organisations. These costs would vary depending on a number of factors including the mechanism adopted, the size of the organisation and how it could be delivered. They may relate to time and resource required for providing evidence of voice, and for delivering voice channels in practice – and again will vary accordingly. For example, trade union facility time is a cost in terms of resource, not necessarily additional spend and would only be considered in this context where a union is recognised for the first time. There may also be directly tangible costs such as using an external consultancy to design and conduct an employee survey.

4.3 Benefits of Options Considered

4.3.1 Real Living Wage Option 1 Maintain Status Quo

It is anticipated that the benefits of maintaining the status quo will mainly accrue to apprentices and 16-17 year olds who are not currently paid the rLW and are employed by grant recipients. Workers currently employed in affected organisations would receive additional salary unless their employer has an approved exception to the rLW condition. The scale of this benefit is currently challenging to estimate for the reasons outlined in the ‘cost to employers’ discussion. However, the scale would largely be that of the cost to employers from additional pay, minus any non-salary labour costs generated.

Maintaining the status quo has the potential for wider benefits, such as: raising the profile and attractiveness of apprenticeships as a high quality training route; increasing the perception of young non-apprentice workers; reducing the scope for potential unfair treatment of apprentices and other 16-17 year old workers.

4.3.2 Real Living Wage Options 2-4

Tables 14 provides a summary of the benefits associated with options 2-4 for real Living Wage condition. While the costs to businesses associated with options 2-4 are lower than under business as usual (option 1) it is also expected that the some of the benefits will be reduced as well.

Table 14: Real Living Wage Options 2-4 and Benefits

RLW Options 2-4: Benefits

Option 2: Remove Apprentices from the Scope of the RLW Condition

• 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 as a result of uplifting 16-17-year-olds to the RLW.
• 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 their 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 costs associated with the potential administrative burden to consider or request an exception for apprentices.
• Aligns with the Living Wage Employer Accreditation Scheme.

Option 3: Remove 16-17-Year-Olds from the Scope of the RLW Condition

• Positive financial impacts for apprentices who get an uplift to at least the RLW and for the wider workforce due to the knock-on impact on pay differentials as a result of uplifting apprentices to the RLW.
• Potential for a reduction in poverty due to higher pay reflective of the cost of living.
• Potential positive impacts on morale, well-being, and family life and relationships for apprentices uplifted to RLW.
• 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.
• Limits the risk of a reduction in the employment of this group of young workers.
• No additional costs associated with the potential administrative burden to consider or request an exception for 16-17-year-old workers.
• Employers not already paying 16-17-year-old workers the RLW 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 RLW, 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 administrative burden to consider or request an exception for 16-17-year-old workers.
• Aligns with the Living Wage Employer Accreditation Scheme.

Option 4: Remove Apprentices and 16-17-Year-Olds from the Scope of the RLW Condition

• Maintains consistency with the Living Wage Employer Accreditation Scheme.
• Limits the risk of a reduction in apprenticeship and 16-17-year-old worker opportunities.
• Reduces the potential administrative 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 RLW 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 RLW, 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 administrative burden to consider or request an exception for 16-17-year-old workers.

4.3.3 Effective Voice Consideration

Table 15 provides a summary of the benefits associated of the proposal of the effective voice condition

Table 15: Consideration of effective voice and benefits

Effective voice proposal

Proposal: Maintain the status quo – Continue to apply the effective voice condition to recipients of public sector grants

Benefits

• Workers continue to have or gain benefit from the establishment of an effective voice in their workplace through appropriate channels at individual and collective levels.
• The organisation benefits from the presence of effective voice, as above.