Fair Work First: guidance

Annex C: Limited exceptions to meeting the real Living Wage condition

General guidance

Funders may approve a limited exception to meeting the real Living Wage condition where a potential grant recipient genuinely cannot afford to pay the real Living Wage to part(s) or all of its workforce.

There should be no assumption that approval of an exception is a guarantee of grant nor – in the case of multiple requests for grants - that an exception will be approved for every grant. Other factors will be taken into account which may affect grant making decisions, particularly in relation to competitive grants.

Any limited exception that is approved is valid for the grant in question and throughout the funded period of said grant, with the presumption that the recipient will move towards compliance before seeking funding in a subsequent year. (Note: the streamlined administrative process in place for Scottish Government grants to local government for 2024/25 is described here)

There is no provision for an exception to meeting the effective voice condition; however funders can recognise the different forms effective voice channels may take, and that are appropriate for different types of organisations. See Annex B.

Process for seeking and considering a request for an exception

It is for a potential grant recipient to request a limited exception and this is to be considered by an appropriate senior authorising/accountable officer of the funder for the relevant grant. (For grants awarded by Scottish Government to local government, see here.)

A Request for an Exception Template is provided in supporting documents to this guidance which organisations may wish to use. Some funders may have other arrangements in place for managing requests for an exception and will advise accordingly. Regardless of the arrangement, the request should define but need not be limited to, the following:

(1) which part(s) of the workforce the organisation is requesting a limited exception for, e.g., apprentices, 16-17 year olds;

(2) the current size of the organisation’s overall workforce;

(3) the number of workers currently in each part(s) of the workforce identified at (1);

(4) the wage rates for each part(s) of the workforce identified at (1);

(5) why meeting the real Living Wage conditionality for the part(s) of the workforce identified at (1) is genuinely unaffordable and provide 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;

(6) the action the organisation will take towards meeting the real Living Wage condition for the part(s) of the workforce identified at (1) and the related timescales.

Where an organisation’s request for an exception to the real Living Wage condition for part(s) of its workforce is approved:

• the organisation still needs to demonstrate that it meets the condition for the rest of its workforce by providing relevant evidence as set out in Annex B of this guidance.
• the organisation is expected to work towards meeting the real Living Wage condition in full within a reasonable timescale to be agreed with the funder and to demonstrate progress during the lifetime of the grant.
• the organisation is required to meet the effective voice condition and should demonstrate its commitment to meeting/working towards the remaining five desirable Fair Work First criteria.
• the funder should reflect an approved exception in the grant award documentation, and may wish to include relevant milestones.
• the exception will apply to onward grant funding awarded by the organisation as outlined below.

Where an organisation applies for multiple grants from different funders, it may use the same case for a limited exception; however it should not be assumed that approval of an exception for one grant will mean approval for another, as decisions are taken on a case by case basis.

Where a grant applicant applies for multiple grants from the same funder (e.g. the same Directorate within Scottish Government) the funder may agree a streamlined process – such as using the exception template provided in the supporting documents – to help minimise the administration task on the basis that the information required to support each case will be broadly the same.

Should a grant recipient wish to seek an exception for repeat funding, it will be required to re-submit a request for consideration by the relevant grant funder.

Funders should maintain a record of any exception(s) they have approved and update the Scottish Government in the format and timescale to be advised by the Fair Work Policy team. A template for this purpose is provided in supporting documents to this guidance which funders are encouraged to use.

Exceptions in third-party arrangements

A grant recipient may issue funding to a third-party to deliver aspects of the funded activity. In this capacity, it may approve a request for a limited exception to meeting the real Living Wage condition, where a third-party genuinely cannot afford to pay at least the real Living Wage to those parts of its workforce directly supporting the grant.

The principal grant recipient should communicate to its funder any exceptions it has approved to third-parties as early as possible in the grant management processes.

Where a principal grant recipient has an approved exception for its own organisation, that exception will automatically pass down to a third-party if this organisation is also unable to meet the condition.

Even in cases where a grant recipient itself is meeting the real Living Wage condition (and therefore does not need an exception), the grant recipient may approve an exception for a third-party for the grant in question. In such a case, it is for the third-party to request an exception and the principal recipient to consider this in line with the above process.

Scottish Government grants to local authorities

A streamlined administrative process for managing limited exceptions to meeting the real Living Wage condition for local authorities has been agreed by the Scottish Government and COSLA. This approach recognises the large volume of grants local authorities receive from the Scottish Government (over and above general revenue grant funding, to which conditionality does not apply) and seeks to minimise bureaucracy.

As such, any local authority which believes it cannot meet the real Living Wage condition for part(s) of its workforce should submit a single request for a limited exception in respect of all Scottish Government grants awarded to the authority. All approved exceptions are valid for grants awarded in 2023/24-2024/25. A template is available in the supporting documents of the guidance for this purpose.