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Fair Work practices, including the real Living Wage in procurement

We believe that a supplier's approach to fair work practices, including paying the real Living Wage, can have a positive impact on the quality of goods, works and services in a public contract.

Statutory Guidance on Addressing Fair Work Practices, including the real Living Wage, in Procurement sets a statutory obligation on public bodies to consider, before undertaking a procurement exercise, whether it is relevant and proportionate to include a question on fair work practices, to be evaluated along with other relevant criteria.

Fair Work practice can and would normally be expected to include fair and equal pay, including the real Living Wage as part of a package of positive fair work practices to be delivered for the duration of the contract.

Best Practice Guidance and a toolkit have also been published to help public bodies and suppliers address Fair Work practices, including the real Living Wage in procurement processes.

Fair Work procurement guidance is included below.

We expect:

  • public bodies to promote fair work practices in all relevant procurement processes
  • suppliers delivering public contracts to adopt and demonstrate appropriate fair work practices, for all workers engaged on delivering public contracts
Living Wage as a requirement in procurement

We consider the payment of the real Living Wage to be the most significant way a supplier can demonstrate its commitment to fair work practices.

The real Living Wage is a rate of pay which is enough to ensure that those receiving it can have an acceptable standard of living, and applies to all employees 18 and over.

It is a voluntary wage rate which is calculated by the Resolution Foundation and overseen by the Independent Living Wage Commission. The rate is reviewed annually.

The real Living Wage is different to the National Minimum Wage (including the 'national living wage') which is the legal minimum an employer must pay an employee and is set by the UK Government.

We have examined how payment, by contractors, of the real Living Wage can be taken into account as part of a public procurement process.

The European Commission has confirmed that public bodies cannot mandate the payment of the real Living Wage as part of a procurement process, for those working on the delivery of a contract.

It is therefore not possible to reserve any element of the overall tender score specifically to payment of the real Living Wage. It is possible to encourage contractors to pay the Living Wage by including a question on Fair Work practices where relevant to the delivery of a contract.

It is important to take account of developing case law decisions on this matter.

Fair work procurement guidance

We have published the following guidance on addressing fair work practices, including the Living Wage, in procurement: