Harrogate Borough Council (HBC) has voted against paying all eligible employees the new Living Wage rate of £8.25 per hour.
The Living Wage Foundation announced in November 2015 that it was increasing the voluntary rate by 40p an hour, meaning it is now £1.35 than the government’s minimum wage.
However, at a meeting of the Human Resources Committee on Wednesday, January 27, the council concluded it was too ‘constrained’ by the budget to introduce the wage.
A new National Living Wage for over-25s of £7.20 will be introduced in April this year but HBC already pay all eligible employees an hourly rate of £7.85.
Currently, the council is not part of the 2,129 employers signed up to the Living Wage Foundation who now have six months to implement the new pay level.
However, Fit Harrogate, Harrogate and Ripon CVS and York City Council are all signed up to the voluntary scheme and will implement the pay rise in due course.
The new rate, which the Living Wage Foundation encourages responsible businesses to pay, is calculated independently and based on the cost of living.
Councillor Richard Cooper, Leader of Harrogate Borough Council and Cabinet Member for Finance and Resources said: “The council is committed to paying all our employees a fair salary. Since April 2015, eligible employees have been paid £7.85 per hour, a significantly higher rate than the National Living Wage of £7.20 which will be introduced from April 1, 2016.
“Faced with significant reductions in central government funding, the council has been working tirelessly to produce a balanced budget that protects front line services.
"Due to the current financial constraints faced by the council, a move to the new higher Living Wage Foundation rate, would require budget growth of over £41,000 which would impact upon the council’s budget and the services we are able to offer our customers.
“We are fortunate to have a highly committed workforce that provides an excellent service for our residents and it is important that we pay our staff a salary which recognises their efforts, and we believe we do.”
Sarah Vero, director Living Wage Foundation said: “We are celebrating those 2,000 responsible businesses that are voluntarily paying the Living Wage to their staff.
“These employers are not waiting for Government to tell them what to do; their actions are helping to end the injustice that is in-work poverty in the UK now.”
Ms Vero added that the Living Wage was good ‘for people and business’ but the council concluded they added cost would be around £80,000 and require budget growth of £41,400.
On October 26, 2015, the Unison Branch Secretary sent a letter thanking the council for introducing the wage from April 2015 and said it was their understanding the new rates would also be adopted.
Since the council’s introduction of the Living Wage on April 1, 74 employees benefited from the increased rate with 53 eligible in this financial year at a cost of £37,600.
However, if the council were to offer the higher Living Wage rate of £8.25 an hour, the cost would be £80,000 and improve the wage of 93 eligible staff.
The council argued that the budget growth required for this had not been factored in to the budget that Cabinet and Scrutiny were currently considering.