BALI-NCF, the National Contractors’ Forum for grounds maintenance contractors, has written to government ministers and members of the Low Pay Commission highlighting the implications for the local authority grounds maintenance sector of the introduction of the National Living Wage (NLW).
Signed jointly by BALI chief executive Wayne Grills and BALI-NCF chairman Phil Jones of ISS Facilities Services – Landscaping, the letter detailed the following consequences for local authority grounds maintenance contractors who are unable to pass the additional cost burden on to their customers:
- Over the five year period of implementation if the NLW, existing local authority grounds maintenance contracts will become financially non-viable;
- Typically, labour costs for the staff involved will rise by 20 per cent over the five years, based on reaching a level of £9.00 by 2020-21 (the end of the current parliament);
- Contract indexation will not match this increase, even where it is not capped, given the number of staff currently on the National Minimum Wage and the fact that indexation only reflects the average increase. The increase that the local authority grounds maintenance industry will experience will be well in excess of general labour inflation;
- Contractors will regrettably default on contracts and, potentially, go out of business with obvious consequences for employees and for local authority clients.
The letter asked government to recognise that these increased costs cannot be funded by the contractor and should therefore be treated as a ‘pass through’ cost, with the local authority picking up the cost in full.
An allowance would then need to be made in each council’s annual settlement to fund this increase with councils acknowledging that they will need to pay more for the grounds maintenance services they receive.
Those receiving the letter included the Chancellor – the Rt Hon George Osborne MP; Secretary of State for Business, Innovation and Skills – the Rt Hon Sajid Javid MP; Chair of the Low Pay Commission – David Norgrove; and Low Pay Commissioner and Director for Employment and Skills at the CBI – Neil Carberry.
Following receipt of the letter, the Low Pay Commission invited Wayne Grills and Phil Jones to a meeting to discuss the issue with the commission’s head of policy and administration, Tony Studd, and policy advisor John Caseley.
The outcome of the meeting is that BALI-NCF has been asked to contribute to Chapter 2 of the commission’s 2016 report to government on the impact of the NLW, and that BALI-NCF will be included in future consultations, with the commission visiting a number of BALI members directly for their input.
Comments
umm, do I understand bali to mean that where a contract price has already been fixed prior to the introduction of the National Living Wage there will be a problem as the extra increase in wage levels above the estimated minimum wage rise will make the contract unprofitable for the contracted company?
if its a five year contract and can see this could be the case HOWEVER, surely all the companies arent paying minimum wages? Surely some are already paying a living wage?
also, and correct me if I'm wrong here as I havent had a local authority contract, but there should be a clause in the T&Cs whereby an external change - such as the government imposing a higher minimum wage payment - is something which the contractor can pass onto the employer / LA - or at least the contract terms need to be re-negotiated and agreed?
I would be amazed that no-one considered the consequences of the living wage minimum on fixed contracts where the minimum wage is the usual level - if I wasnt cynical ...
I'd have thought that most employees would already need to be paid this just to be able to afford to live in most parts of the South East, with regard to housing costs..
and that they, 'the contractors' should have had the foresight to realise that their employees would need to be earning 'more' just to survive.
The minimum wage and the minimum living wage, have not just occurred, they have been on the 'agenda' for some considerable time.
Likewise local government, councils, industrial parks who typically use the services of contractors would and should be fully aware of minimum wage requirements.
Things change, as always, contracts can not be set in stone, e.g VAT changes