Good Work for All: Long-term thinking for long-term benefits, Aviva’s Living Wage story

Aviva plc is a British multinational insurance company headquartered in London. It is the largest general insurer, and a leading life and pensions provider, in the UK and has a significant regional presence with c.17,000 employees in the UK and Ireland.

Aviva’s approach to the Living Wage has been one of gradual implementation. Aviva adopted the London Living Wage (LLW) in the first instance and then the real UK national Living Wage to recognise its social responsibility to stakeholders and to manage the significant reputation, political and brand risks which emerged around living wage issues.

Aviva first adopted the Living Wage in London in response to campaigns aimed at the FTSE 100 by TELCO and the Greater London Authority in 2005. Joanne Goddard, Head of CR Governance and Engagement at Aviva noted “we signed up without much hesitation. The upside was hugely beneficial to the employees affected and the impact on costs was minimal. It was also the right thing to do.”

The process
In 2010, Aviva recognised that a living wage was of increasing importance to stakeholders with campaigns starting to target specific companies. In particular, FairPensions (who later became ShareAction) started talking about the importance of a living wage in the media, and asking questions on behalf of shareholders at AGMs. Aviva took a proactive stance ahead of its 2011 AGM and engaged directly with FairPensions. This meant when questions about adopting a living wage were asked the CEO and Board were able to answer with knowledge.   They perceived there was a case to look at for adopting a living wage across Aviva’s UK business.

Aviva and FairPensions continued to meet to discuss reward structures including pay scales, differentials and regional differences. This engagement led to an increased understanding of living wage benefits and impacts, and Aviva was able to move the agenda further forward as a result. Engagement with the City and campaigners has since taken place on a regular basis addressing living wage issues both directly and indirectly, and ensuring a socially responsible business case for a living wage was developing.

Of particular significance to Aviva, rolling out the Living Wage across the UK was recognition of its high number of staff and associated community involvement in Norwich and York the desire to expand their living wage commitment outside London.

In adopting the Living Wage outside London, Aviva was also responding to direct political pressure in the regions and therefore managing their political risk. For example, a couple of years ago Rachel Reeves (Labour – Norwich MP) asked numerous questions on the Living Wage. For Aviva, the Living Wage campaign is an important public policy issue and an important subject of political engagements with MPs. Engagement around a living wage as a public policy issue has helped Aviva to develop its position and contribute to public debate on the issue. Indeed, there have been comments in The House of Commons specifically referring to Aviva on the Living Wage.

In 2012 Aviva became a Principal Partner of the Living Wage Foundation, and in 2013 gained London accreditation as a Living Wage Employer. By 2014, its accreditation as a Living Wage Employer has been extended to all full-time direct employees in the UK and included a commitment to roll out the Living Wage with all its on-site contractors. During the new round of tendering for facilities contracts, Aviva asked for all tenders to be priced to include the Living Wage as a minimum standard and are engaging with contractors to consider the impact of this.

The benefits
Aviva implemented the payment of the LLW some years before national accreditation was developed by the Living Wage Foundation. The experience proved what a positive step this was and Aviva, and their supplier at the time quickly noticed the impact on:

  • Lower attrition rates
  • The ability to recruit better calibre cleaning operatives
  • The ability to provide longer-term training as opposed to core basic training for what was, at the time, an ever-changing workforce
  • Willingness to work with cleaning force on pay and conditions with unionisation

After implementation of the LLW, cleaners from other firms tenanted in Aviva’s head office were requesting to work for Aviva. This provided a management issue for the cleaning contractor as there was dissatisfaction that one set of employees were paid what was considered a preferential rate. Over time this situation dissipated as more and more tenants realised the benefit of the LLW and converted their contracts too.

Lessons learnt and advice for other employers
In July 2014 when Aviva became nationally accredited and implemented the Living Wage to other Aviva offices in the UK, this proved highly popular with suppliers operatives who were at the time being paid industry regional pay rates. However, this move did not come without its challenges. For example, increasing the hourly pay rates for cleaning operatives now meant that almost all cleaning supervisors were being paid the same as their team members. Without an increase in the pay differential, the supervisors would either leave or request a demotion to a cleaning operative role with less responsibility but at the same hourly pay rate.

The biggest issue Aviva faced after implementation was the impact on the relative pay scales up the organisation in our supply chain. There is a need to maintain a difference between pay grades, without a pay differential for supervisory roles overall cleaning costs would have increased by 3.81% per annum. With the agreed increase reflecting the differentials in pay scale, the actual overall increase was 4.42% per annum. Aviva found an unanticipated impact on employees who were being paid above the Living Wage and had their pay uplifted – and gained positive feedback in general from all staff.

Another area of note is that of the three locations where Aviva premises are cleaned overnight, but there is still a daytime housekeeping presence, the night time cleaning role previously attracted an enhanced pay rate. Now, almost everywhere, all cleaning operatives and daytime housekeepers earn the Living Wage. This has been challenged by the night time cleaning operatives and a workable solution for all is currently being considered.

During a recent cleaning and security tender Aviva announced the contract would be awarded to a National Living Wage accredited company. Of the tender submissions Aviva was pleased to note the following statements and comments:

Bidder A

“Overall, we believe the Living Wage has many positive impacts including individual well-being, commitment, enhanced family and community life which in turn improve loyalty, performance and standards.”

Bidder B

“We are committed to setting pay rates on the Aviva contract in accordance with the Living Wage and, in doing so, we will provide Aviva with the following benefits:

  • Creating opportunities for people to provide for themselves and their families
  • Improved levels of service
  • Improved employee’s opinion of and commitment to their role
  • Improved productivity
  • Increased motivation and morale
  • Reduced absenteeism
  • Minimised disruption to your business
  • Substantial positive impacts on recruitment and retention
  • Support your CR strategy and targets

Bidder C

“Where our clients have elected to implement the Living and London Wage we have seen a reduction in employee turnover, improved engagement and enhanced performance as we are able to attract the best calibre people in the market to these contracts. In one small study of a group of contracts that pay the Living Wage versus a group of similar contracts that did not, we saw a 4% decrease in employee turnover.”

The business case for Aviva
Aviva considers that adoption of the Living Wage will be beneficial to service levels and cost-effective in the long term. Engagement with investors and stakeholder representatives on the Living Wage and managing investor expectations is critical to a private sector ‘business approach’.

Being Living Wage compliant allows Aviva to be a more effective advocate of issues such as poverty and human rights. For example, dialogue around the Living Wage has extended to issues linked to human rights internationally and has led to a number of wider discussions where a ‘seat at the table’ is a direct result of our progress with the Living Wage.

This case study has been provided by The Living Wage Foundation.
Find out more about becoming a Living Wage Accredited employer.