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Productivity Boost Key to Success of National Living Wage

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The need to boost productivity in low-paying sectors and among small employers will be reinforced by the introduction of the new National Living Wage (NLW) in April, though there are huge uncertainties over how businesses can achieve this. This is according to a new report on how employers expect to respond to the NLW, published today (Wednesday) by the Resolution Foundation and the CIPD, the professional body for HR and people development.

It also suggests that employers are far more likely to absorb the cost of the increase than pass it on to consumers through higher prices.

The report is based on a survey of more than 1,000 employers carried out in September 2015, which was followed by in-depth interviews.  It shows that the ways in which employers expect to respond to the NLW varies greatly between small and large employers, and across different sectors of the economy. Over half (54 per cent) of employers expect the NLW to have some impact on their labour costs.

The report highlights a welcome desire by organisations to raise productivity, with 32 percent of large employers expecting it to be part of their response. Several employers that were interviewed said it would spur them to focus more on staff output. For example, one hotel manager explained that they would focus more on training permanent staff, rather than rely on a larger pool of casual contracts.

However, there was considerable uncertainty about how to raise productivity and small firms were more pessimistic about their ability to do this.  Among organisations with less than 250 employees, the proportion expecting to absorb the cost through lower profits (26 per cent) was higher than the proportion expecting to offset costs through higher productivity (25 per cent). Many argued that improving productivity was not viable, with one business summarising concerns by saying, “we’ve done all this before. I don’t think I can get any more out of them [staff] again”.

Encouragingly, there was little appetite for reducing staff levels – just 10 per cent of small firms considered this as an option, rising to 17 per cent of larger organisations. Several employers argued that reducing staff levels or raising prices would hit the competitiveness of the firm, with one hotel owner stating, “if you start cutting staff…that could impact on the guest experience”.

Hiring younger workers because they aren’t entitled to the National Living Wage wasn’t considered a viable long-term plan either. As one employer explained,“because of the need for experienced staff, it would be difficult to employ more people aged 25 and under”.

However, the report suggests there could be an impact on the pay of staff paid above the NLW.  While just nine per cent of employers said they planned to give employees a lower basic pay rise to help pay for the NLW, almost half of employers hadn’t yet decided what to do in order to pay for the NLW.

The challenge for employers is meeting the cost while preserving incentives for career progression and rewarding extra responsibility. One employer highlighted how increases in the National Minimum Wage (NMW) had completely eroded pay differentials saying, “now our wage structure is not so much a structure, it’s more of a wage.”

Several employers raised doubts about how widespread compliance will be. One childcare director argued that there are a high number of workers in the sector who are already being paid below the NMW.

The report makes a number of recommendations to support the successful implementation of the National Living Wage, including:

–        Providing information, advice and assistance to firms in low-paying sectors who are looking to raise their productivity, particularly SMEs

–        Focusing on progression, for example by ensuring Universal Credit helps low-paid workers into better-paying positions

–        Ensuring that enforcement efforts are sufficient to tackle concerns about compliance

–        Making the implementation of the NLW a focus of new, devolved economic leadership

–        Aligning the timing of the annual uprating announcements of the National Living Wage and the National Minimum Wage to the same month each year

The National Living Wage – the new legal wage floor for workers aged 25 and over, which comes into effect on 6 April – is set to benefit around 4.5 million employees, rising to 6 million in 2020.

Conor D’Arcy, Policy Analyst at the Resolution Foundation, said:

“The National Living Wage will make a huge difference to millions of low-paid staff. The higher wage floor should spur productivity gains, and encouragingly employers seem keen to respond in this way. How these efficiencies are found remains unclear however, particularly among SMEs.

“The introduction of the National Living Wage will be a big bang for low-paid staff. But it will be more of a slow burner for businesses, with many waiting to see how sectors respond over the coming years. This presents a crucial window of opportunity for government to work with business to share best practice, understand the support they need, and consider how productivity can be improved in low paying sectors.

Mark Beatson, Chief Economist at the CIPD, said:

“With just over a month to go until the introduction of the National Living Wage, most employers likely to be affected will be concentrating on the practical steps necessary to ensure they implement the new wage on time.  But our reports suggest there is a lot more uncertainty among employers on how they are going to make sure this step up in pay isn’t one that threatens jobs or the business.

“Large employers appear to have more options available to them when deciding how to respond.  Small and medium sized businesses are more likely to absorb the cost through lower profits, at least in the short term.  Many employers say they intend to manage the cost through increased productivity, but our case studies suggest we may often find a gap between good intentions and reality, due to a lack of knowledge about how productivity can be improved and other pressures on management which mean they never quite get round to changing the way the business operates.

“Government must continue to improve awareness of the NLW by engaging with employers, but this needs to extend beyond help on compliance.  Small firms will need extra help and advice on how they can manage the process, with clear signposting to sources of practical support.

“Universal Credit could help the economy sustain a higher minimum wage if it can deliver practical and focused support for claimants in low-paid work that helps them improve their skills and develops their potential for higher-paid work.  Our concern is that implementation will in the end be driven by pressure for short-term reductions in the welfare bill, with employees encouraged to work more hours for low pay rather than the same hours at a higher pay rate.”

Employer responses to the NLW by firm size

Energy

Is Wood Burning Sustainable For Your Home?

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sustainable wood burning ideas

Wood is a classic heat source, whether we think about people gathered around a campfire or wood stoves in old cabins, but is it a sustainable source of heat in modern society? The answer is an ambivalent one. In certain settings, wood heat is an ideal solution, but for the majority of homes, it isn’t especially suitable. So what’s the tipping point?

Wood heat is ideal for small homes on large properties, for individuals who can gather their own wood, and who have modern wood burning ovens. A green approach to wood heat is one of biofuel on the smallest of scales.

Is Biofuel Green?

One of the reasons that wood heat is a source of so much divide in the eco-friendly community is that it’s a renewable resource and renewable has become synonymous with green. What wood heat isn’t, though, is clean or healthy. It lets off a significant amount of carbon and particulates, and trees certainly don’t grow as quickly as it’s consumed for heat.

Of course, wood is a much less harmful source of heat than coal, but for scientists interested in developing green energy sources, it makes more sense to focus on solar and wind power. Why, then, would they invest in improved wood burning technology?

Homegrown Technology

Solar and wind technology are good large-scale energy solutions, but when it comes to small-space heating, wood has its own advantages. First, wood heat is in keeping with the DIY spirit of homesteaders and tiny house enthusiasts. These individuals are more likely to be driven to gather their own wood and live in small spaces that can be effectively heated as such.

Wood heat is also very effective on an individual scale because it requires very little infrastructure. Modern wood stoves made of steel rather than cast iron are built to EPA specifications, and the only additional necessary tools include a quality axe, somewhere to store the wood, and an appropriate covering to keep it dry. And all the wood can come from your own land.

Wood heat is also ideal for people living off the grid or in cold areas prone to frequent power outages, as it’s constantly reliable. Even if the power goes out, you know that you’ll be able to turn up the heat. That’s important if you live somewhere like Maine where the winters can get exceedingly cold. People have even successfully heated a 40’x34’ home with a single stove.

Benefits Of Biomass

The ultimate question regarding wood heat is whether any energy source that’s dangerous on the large scale is acceptable on a smaller one. For now, the best answer is that with a growing population and limited progress towards “pure” green energy, wood should remain a viable option, specifically because it’s used on a limited scale. Biomass heat is even included in the UK’s Renewable Heat Initiative and minor modifications can make it even more sustainable.

Wood stoves, when embraced in conjunction with pellet stoves, geothermal heating, and masonry heaters, all more efficient forms of sustainable heat, should be part of a modern energy strategy. Ultimately, we’re headed in the direction of diversified energy – all of it cleaner – and wood has a place in the big picture, serving small homes and off-the-grid structures, while solar, wind, and other large-scale initiatives fuel our cities.

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Energy

7 Benefits You Should Consider Giving Your Energy Employees

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As an energy startup, you’re always looking to offer the most competitive packages to entice top-tier talent. This can be tough, especially when trying to put something together that’s both affordable but also has perks that employees are after.

After all, this is an incredibly competitive field and one that’s constantly doing what it can to stay ahead. However, that’s why I’m bringing you a few helpful benefits that could be what bolsters you ahead of your competition. Check them out below:

Financial Advising

One benefit commonly overlooked by companies is offering your employees financial advising services, which could help them tremendously in planning for their long-term goals with your firm. This includes anything from budgeting and savings plans to recommendations for credit repair services and investments. Try to take a look at if your energy company could bring on an extra person or two specifically for this role, as it will pay off tremendously regarding retention and employee happiness.

Life Insurance

While often included in a lot of health benefits packages, offering your employees life insurance could be an excellent addition to your current perks. Although seldom used, life insurance is a small sign that shows you care about the life of their family beyond just office hours. Additionally, at such a low cost, this is a pretty simple aspect to add to your packages. Try contacting some brokers or insurance agents to see if you can find a policy that’s right for your firm.

Dedicated Time To Enjoy Their Hobbies

Although something seen more often in startups in Silicon Valley, having dedicated office time for employees to enjoy their passions is something that has shown great results. Whether it be learning the piano or taking on building a video game, having your team spend some time on the things they truly enjoy can translate to increased productivity. Why? Because giving them the ability to better themselves, they’ll in turn bring that to their work as well.

The Ability To Work Remotely

It’s no secret that a lot of employers despise the idea of letting their employees work remotely. However, it’s actually proven to hold some amazing benefits. According to Global Workplace Analytics, 95% of employers that allow their employees to telework reported an increased rate of retention, saving on both turnover and sick days. Depending on the needs of each individual role, this can be a strategy to implement either whenever your team wants or on assigned days. Either way, this is one perk almost everyone will love.

Health Insurance

Even though it’s mandated for companies with over 50 employees, offering health insurance regardless is arguably a benefit well received across the board. In fact, as noted in research compiled by KFF, 28.6% of employers with less than 50 people still offered health care. Why is that the case? Because it shows you care about their well-being, and know that a healthy employee is one that doesn’t have to worry about astronomical medical bills.

Unlimited Time Off

This is a perk that almost no employer offers but should be regarded as something to consider. According to The Washington Post, only 1-2% of companies offer unlimited vacation, which it’s easy to see why. A true “unlimited vacation” program could be a firm’s worse nightmare, with employees skipping out every other week to enjoy themselves. However, with the right model in place that rewards hard work with days off, your employees will absolutely adore this policy.

A Full Pantry

Finally, having a pantry full of food can be one perk that’s not only relatively inexpensive but also adds to the value of the workplace. As noted by USA Today, when surveying employees who had snacks versus those who didn’t, 67% of those who did reported they were “very happy” with their work life. You’d be surprised at how much of a difference this could make, especially when considering the price point. Consider adding a kitchen to your office if you haven’t already, and always keep the snacks and drinks everyone wants fully stocked. Doing so will increase morale tremendously.

Final Thoughts

Compiling a great package for your energy company is going to take some time in looking at what you can afford versus what’s the most you can offer. While it might mean cutting back in other areas, having a workforce that feels like you genuinely want to take care of them can take you far. And with so many different benefits to include in your energy company’s package, which one is your favorite? Comment with your answers below!

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