THE BLOG

Ikea's Commitment to the Living Wage Represents More Than Just a Pay Rise

21/07/2015 10:34 BST | Updated 21/07/2016 10:59 BST

On Monday we were happy to announce that we will adopt the Living Wage (as defined by the Living Wage Foundation) from the 1 April 2016. This means all our co-workers across the UK will receive a minimum of £7.85 per hour and £9.15 per hour within London. The Living Wage is a hot topic in the press at the moment so we feel it's important to explain why we have made this decision.

Ikea is a values-driven company. We are guided by a vision "to create a better everyday life for the many people" and this vision includes our co-workers as much as our customers and the communities touched by our business. Providing a meaningful wage to all of our co-workers, that supports their cost of living, is an important part of our values which are fundamental to who we are.

The initial £7.5million investment is a big one for us and will benefit over half of our co-workers here in the UK. We have been discussing this for the past year and the thought behind our decision is pretty simple: it is the core of our values to treat people equally and decently. We believe in paying a fair wage for all co-workers regardless of how old they are and that also takes into account where they live.

We agree with the Living Wage Foundation's definition of the "Living Wage", and whilst we think that the government has taken a step in the right direction, it doesn't go far enough.

Through speaking to our co-workers, we know the Living Wage is an important issue for them. However, what they've also told us is that it's not just about pay. This announcement is part of a wider transformation we are making into the basic conditions for all co-workers. Our approach is a holistic one that not only includes giving the right level of pay, but also ensuring that co-workers have a schedule and the right number of contracted hours that works for them, as well the business and our customers. Whilst we do need flexibility we want to have a relationship with our co-workers where they feel they can trust Ikea long term.

This transformation is not only the right thing for our co-workers, we think it also makes good business sense. Co-workers are the most important ambassadors of our brand and fundamental to our success. I truly believe that a team with good compensation and working conditions will be in a better position to provide a great experience for our customers and therefore contribute to our growth as a business.

Co-workers have told us that not having to worry about their living situation will give room to focus better at work. Therefore, if you look at it from a pure business perspective, an engaged workforce is also a more productive one. We expect this transformation will reduce absence and reduce employee turnover, as well as make us a more attractive employer. This is especially important as we look to grow and expand in the UK over the coming years.

The Living Wage is the latest in a number of investments that we have made for our co-workers over the past two years. In May 2013, we introduced the One Ikea Bonus Programme, a bonus programme which means co-workers can earn up to 130% of one month's salary, and in December 2013 we introduced the Tack! loyalty programme that rewards those with five or more years service with an extra payment to their pension fund if global targets are met. Co-workers also have access to a generous range of additional benefits, including subsidised meals and employee discounts.

Of course, we'd like to reassure customers that we will not raise our prices because of this announcement! In order to reach our vision of creating a better everyday life for the many people, it means being even more affordable, so we will continue to invest in lowering our prices where we can.

I've also been asked why we aren't launching the living wage immediately. I'd like to clarify that the reason for this is that over the next nine months we will work closely with our co-workers to understand the impact of making this transformation a reality. By having an open dialogue with every one of our co-workers, we will have a better understanding of individuals' needs and desires in order to create the right solutions that balances the needs of our co-workers as much as our customers. Since Friday when we made this announcement internally, we have many co-workers not only expressing great excitement but also asking many good and relevant questions, which we will now take into consideration.

These long term investment in our people, based on our values and driven by passionate people in our organisation, will not only deliver strong business results for us, but more importantly will improve the lives of thousands of our co-workers and that's something I can honestly say is one of the proudest achievements in my career at Ikea - so far.

Pernille Hagild is the Country HR Manager, Ikea UK and Ireland