BrewDog's Real Living Wage departure leaves a bitter aftertaste
BrewDog, the Ellon based craft beer giant, has received significant backlash following their recent decision to drop out of the Real Living Wage Scheme.
Let's start by clarifying what the Real Living Wage is and how it differs from the National Minimum Wage (NMW) and the National Living Wage (NLW). Currently, workers who are school leaving age up to age 23 receive the NMW, while those aged 23 or over are entitled to the NLW at a rate of £10.42. However, starting in April 2024, individuals aged over 21 will also be entitled to the NLW, which will increase to £11.44. It's important to note that apprentices have separate rates.
The Real Living Wage scheme is a voluntary scheme which provides a benchmark for employers who choose to pay their employees a rate that meets the basic cost of living in the UK and London. The current Real Living Wage rates are £12 per hour and £13.15 in London.
Newly recruited BrewDog workers will now be hired on the NLW instead of the rate currently paid to existing workers.
Additionally, the brewer has decided that its London based workers will not receive an increase in the hourly pay rate offered from April, meaning that the rate for bar staff will remain at £11.95 an hour.
This will be £1.20 below the Real Living Wage in London for that time but still above the NLW.
Outside of London, workers will see an increase in pay from the 1 April to £11.44 an hour, which will be the new NLW introduced that month. This will be 56p below the Real Living Wage of £12 an hour.
BrewDog has received extensive online criticism following this decision, with former staff accusing the brewery of “abandoning its principles.” A lot of the worker’s and patron’s anger stems from the fact that BrewDog’s commitment to paying the Real Living Wage “has been a cornerstone of BrewDog’s public identity for years.”
There is no doubt that BrewDog brand themselves as a moral and ethical company, however, this is not its first scandal relating to its employee relations. In 2021, an open letter to BrewDog, written by over 100 former employees, was published. This letter brought the company’s workplace culture into question, stating that it was a “culture of fear” and “built on a cult of personality.” With these scandals combined, it has raised questions as to whether BrewDog is as committed to their values as they represent themselves to be.
The decision to step away from their commitment to the Real Living Wage comes at a time where people are struggling with the cost-of-living crisis. The timing of this decision is likely to be a significant contributor to the anger felt by many. Bryan Simpson, lead organiser of Unite Hospitality, said that: "BrewDog have been paying the real living wage since 2015. To withdraw it now, during the most acute cost of living crisis in a generation, is outrageous.”
However, whilst the situation is undeniably unfortunate, BrewDog’s decision is unlikely to be as indefensible as it is being portrayed in the media. Last year, the brewery had an operating loss of £24 million, with James Watt, the CEO, stating that: “in 2022, we saw energy bills for our brewery increase a staggering threefold, and with price increases affecting nearly every element of our supply chain, the cost of producing Punk IPA increased by an eye-watering 34% year on year." It is therefore apparent that BrewDog is also struggling with the consequences of the cost-of-living crisis and inflation.
In 2024, there is an expected rise in redundancies. Speaking with our Restructuring & Insolvency team they commented that taking action as far in advance as possible of critical financial difficulties is essential. It may have been BrewDog’s decision to stop paying the Real Living Wage is part of a package of measures to avoid having to make redundancies and to turn their financial fortunes around.
We are already seeing BrewDog offer alternative arrangements to make up for this real-term pay cut. For example, James Watt is giving 20% of his own equity in the company back to its workers over a four-year period. Providing new benefits to their workers is likely to prove crucial in maintaining and improving their employee relations and brand identity.
Perhaps the more important lesson to businesses from this scandal is the importance of messaging and managing the communications with unions and employees to ensure that critical business decisions don’t end up causing further damage to brand and reputation. Employee trust and confidence is critical. The trick is how to maintain this trust and confidence in the face of extremely difficult trading conditions.