Fat Beehive to introduce £4K a year London weighting from 1st April
Paying people more to work in cities goes back to the beginning of civilisation, but London Weighting dates back to the 19th century. It was more formally adopted in the 1970s, when it was introduced to recognise the additional cost of living and working in London, especially for key workers, civil servants, teachers and the NHS.
However, there is currently no systematic or agreed approach to calculating this weighting or allowance, with significant variation across employers and sectors. The Civil Service London weighting was paid to civil servants whose permanent place of work was within five miles of Charing Cross (Inner London Weighting) and between five and 18 miles from Charing Cross (Outer London). The Civil Service dropped the blanket policy in the late 90s, allowing departments to set their rates. (When I joined the Civil Service in 1987, Outer London weighting was £1800, and Inner London weighting was £3700. In 2019, the Environment Agency rates were £1836 and £3702, respectively – not much change).
Inner London Weighting allowances:
- Met Police – £6906
- NHS – £7097
- Environment Agency – £3702
- Teachers – Between £5088 and £9331
- Sixth Form Colleges – £4095
According to the London Trust research from 2022, the minimum London Weighting needs is £9,600 for Inner London and £6,549 for Outer London, which covers the additional costs of working in London. From my calculations, my London staff would need to be paid £16K more a year to have the same disposable income as someone in my Manchester office, mostly due to the average rent in Manchester being £627 compared to £1400 in London, not helped by the recent interest rate hikes.
Higher Salary or London Weighting
London Weighting has traditionally been a public sector initiative, with the private sector paying people more to work in London. But paying people more to do the same job can lead to discrepancies and make it more difficult to ensure equal pay. Whilst staff that move to London would welcome a pay increase, staff moving out of London can’t have their salary reduced, (whereas London weighting can be added or removed based on location). So, within the private sector, there has been a general levelling of salaries across the UK, which, combined with hybrid working, has made dealing with the high cost of living in the capital difficult. However, London schools are becoming empty as people move out, and there is concern across the political spectrum about this issue.
At Fat Beehive we pay people in the UK the same rate for the same work regardless of where they live. So, a developer in Manchester with the same experience and skill set will be paid similarly to a developer in London at the same level. This is the right approach, as we have seen that a laissez-faire approach tends to favour white, straight men when it comes to pay and benefits.
London Weighting and Attendance Allowance
When looking at pay and benefits this year, we wanted to:
- Recognise the higher cost of working from the London office (there is a clear trade-off between living close to the office and paying high rents or living further out long / expensive commutes on public transport).
- We want to keep equal pay across departments and functions, as this is the fairest approach. We do not want to pay people in Manchester less for doing the same work or offer different cost-of-living increases based on where people work.
- Recognise that the company benefits when people attend the office, and these benefits increase with the number of people participating. (London is our main office, with 23 staff members (half our team).
London Weighting Allowance
While recognising the higher cost of living in London and accepting that the London Trust figure of £9600 is probably correct, we must also be sustainable as a company. We also work in a competitive market, so we need to keep costs proportionate, so we have set the rate for 2024/25 at a flat rate of £4K per person for attendance at the Lant Street office (min 3 days a week) from 1st April 2024.
Without recognising the much higher cost of living in London we risk losing talent from London; and if people are just surviving then the knock-on impacts for the cultural and social life of this great city will be eroded further.
