Corporate social responsibility will never make up for the inadequacy of the minimum wage in the capital
On 28 May 2003, Abdul Durrant, a cleaner at HSBC’s offices in Canary Wharf in London’s Docklands, rose to his feet at the company’s annual general meeting and asked chairman Sir John Bond for “a living wage” and a pension. Sir John – doubtless feeling it was the sort of thing a chap could well do without in front of his investors – replied that, like all companies in the City, HSBC does not employ cleaners. They were the employees of cleaning contractors. It was not up to him, as a client, to dictate pay and conditions to another firm.
As The East London Communities Organisation (Telco), a coalition of faith-based, union and grass-roots bodies, began approaching other companies on behalf of cleaners working in the City, this has been the consistent response. Employees are the responsibility of the employer. It is an orthodox, logical, market-orientated position.
Telco tried to use the leverage of corporate social responsibility (CSR) policies to argue that hourly rates ranging from the National Minimum Wage of £4.50 up to £5.20 an hour were not enough to survive on in London – even with the Government’s complicated armoury of tax credits. But to no avail. Ranked against the imperative of outsourcing, CSR was a feeble consideration.
Until last week, that is. Last week, Barclays Bank announced Rentokil Initial had won the contract to clean its new headquarters in Canary Wharf, set to open next January.
But in a move that has far-reaching implications elsewhere, the contract also includes minimum standards. As well as a rate of £6 an hour, after six months service, cleaners get sick pay for up to 15 days; a pension with a 4.5 per cent employer contribution; and 20 days annual leave in addition to eight bank holidays (cleaning companies typically include bank holidays in the 20-day minimum under the Working Time Regulations).
In the low-profit, ferociously competitive world of contract cleaning, such a package is unheard of. Yet, for once, the significance is not in the details, but in the principle. Barclays has conceded that, in effect, it is responsible for the terms and conditions of indirectly employed staff.
The deal will apply only to the 80 cleaners at its headquarters. But it is hard to imagine that security guards, caterers, and cleaners in the branch network won’t begin agitating as contracts come up for renegotiation.
Telco has consistently avoided blaming cleaning companies for paying sub-survivable rates; the clients call the shots, it has argued. Barclays is the first big private sector organisation to agree.
A comparable development in the public sector was last February’s accord in local government that workers for council contractors should have terms and conditions “which are, overall, no less favourable” than those of directly employed staff.
It is also one of the rare occasions I can think of when the moist aspirations of CSR have been translated into the terse clauses of contracts. If we discount the sly, but somehow powerful motive of putting one over on HSBC, Barclays says it has taken a “commercially viable, but creative decision” in line with a desire to be socially responsible.
At the same time, it may even have raised questions about outsourcing. If a company is prepared to pay above market rates to a contractor to ensure it gets labour standards compatible with its public image, what is the point in outsourcing at all? They may as well cut out the middleman.
Telco favours a living wage of £6.70 an hour – a figure calculated by the Family Budget Unit, a group of social policy academics, as being the minimum a family of two working adults and two dependant children require to get by in the capital. Yet, it acknowledges that the Barclays deal is “a breakthrough”. As Telco talks to other publicity sensitive companies (Aviva being one), it is hoping a kind of inverted market might evolve in ‘responsible contracting’.
However, perhaps the real significance of Barclay’s announcement lies buried in the background: the irrelevance of the National Minimum Wage to high-cost areas like the South East. The chairman of the Low Pay Commission, Adair Turner, has always argued the minimum wage is not there to guarantee enough to live on in every part of the UK. Last year, he told me: “If you try to achieve it all by the minimum wage, it is highly likely you will undermine your own objectives because you will create unemployment.”
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That is why the ‘modern’, ‘sophisticated’, social democratic position on redistribution has two parts: a minimum wage to set a pay floor; and a battery of means-tested tax credits. Working together, they lift the low paid out of extreme poverty without damaging the labour market – or so the theory goes.
Set against this argument is a far more visceral instinct about what is basically right on pay: that employers should offer wages that provide enough to live on, and that it is not the role of the state to subsidise low-paying companies through tax credits. An adequate wage now travels under the alias of corporate social responsibility, it seems.
