Maintaining pay gaps between the lowest paid workers and their superiors is expected to see the new national living wage cost councils in excess of the £1bn originally predicted, LGC has learned.
LGC analysis found almost a third of the points on local government’s national pay spine will be wiped out by the end of the decade when the national living wage is set to reach at least £9 an hour.
Chancellor George Osborne announced in his July Budget a new national living wage from next April, initially set at £7.20.
The Local Government Association calculated this would cost local authorities £340m in 2016-17, rising to £1bn a year by 2020 as the national living wage increases.
However, LGC understands that calculation did not factor in maintaining differences between existing pay scales.
Based on the current pay spine, and assuming a person works a 37 hour, five day week, LGC analysis has found the bottom 13 of 44 pay ‘spinal column points’ will be overtaken by a £9 per hour national living wage by the end of the decade. That means someone earning £13,500 a year, or £7 per hour, in 2015 could see their annual wage rise by about £4,000 by 2020.
GMB national secretary Brian Strutton said the national living wage would “compress” pay grades and “make a mockery” of job evaluations if the national pay structure was left unaltered.
Mr Strutton said local government had “no choice” but to undertake the “enormous task” of reviewing the national pay structure when pay negotiations for 2016-17 begin in the autumn.
Unite’s national officer for local authorities Fiona Farmer told LGC the national living wage would have a “devastating impact” on the current pay structure.
Ms Farmer said any rise above £9 an hour would devalue people’s pay in lower management roles and lead to “even more of a squeezed middle” unless the national local government pay scale was extended to allow differences between wages to be maintained.
“You will have people with different levels of knowledge, experience and skills all on the same level of pay,” she said. “Would you take on managerial or extra responsibilities if those you were supervising were getting the same level of pay as you? I don’t think so.”
Ms Farmer reinforced calls for a pay review and said: “Are we just going to sit there and fiddle while Rome burns or are we going to tackle pay structures full on and take this opportunity to do something about it in the next four or five years?”
An LGA spokesman said: “The LGA…agrees that the national living wage presents councils with a challenge not just with the immediate cost of its introduction next April but also how it will impact on higher pay points by compressing internal differentials.”
LGC understands the LGA will make representations about the financial impact of the national living wage on local government as part of its response to the spending review.