A Labour council in London is due on Monday to become the first in the country to offer firms a discount on their business rates if they pay the living wage.
Employers in Brent could save as much as £5,000 if they pay all workers at least £9.15, the living wage rate for London, instead of just being bound by the national minimum wage, which is £6.50 an hour for adults.
Brent will have to fund only 30% of the costs itself because, following coalition changes giving councils more flexibility over business rates, central government will meet half the cost. The Greater London authority will pay the remaining 20%.
The largest firms, with more than 500 staff, would get £5,000, and the smallest, with fewer than 10, would get £250, with varying discounts for those in between.
Greenwich, another Labour council in London, is expected to adopt the idea, and Rachel Reeves, shadow work and pensions secretary, said Labour would be encouraging all councils to do the same.
About 30% of people in Brent earn less than the living wage and the council, which is a living wage employer itself, thinks firms will benefit as well as staff because higher wages could improve motivation and productivity.
Labour is committed to promoting the living wage through “make work pay” contracts if it gets into government, involving firms getting a tax break worth an average £445 per worker if they lift pay up to the living wage level, and Reeves, who is visiting Brent on Monday, said firms could also get business rates discounts if more councils followed the Brent example.
She described the initiative as “a brilliant idea to tackle low pay which is good for everyone – workers, employers and taxpayers”.
The council estimates up to 200 employers in the borough will take advantage of the scheme.
