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Living Wage through Procurement

The Living Wage is a rate of pay which is enough to ensure that those receiving it can enjoy an acceptable standard of living.  The rate will be different for different places reflecting different costs of living. 

In the UK the rate is an hourly rate set independently and updated annually by the Living Wage Foundation and calculated by the Centre for Research in Social Policy at Loughborough University.

The Scottish Government has examined how payment, by contractors, of the Living Wage can be taken into account as part of a public procurement process.  The European Commission has confirmed that public bodies are unable to make payment of the Living Wage a mandatory requirement as part of a competitive procurement process where the Living Wage is greater than any minimum wage set by or in accordance with law. 

It is also important to take account of developing caselaw decisions on this matter.   It is therefore not possible to reserve any element of the overall tender score specifically to the payment of the Living Wage.  It is possible, where relevant to the delivery of a contract, to encourage contractors to pay the Living Wage. 

The Procurement Reform (Scotland) Act 2014 has addressed and defined living wage in national legislation. It provides for Scottish Ministers to issue statutory guidance on how a company’s approach to recruitment, remuneration (including living wage), and other terms of engagement should be considered when selecting bidders and awarding public contracts, where such matters will affect the quality of service that the bidder may provide.  In addition, the 2014 Act requires public bodies, when preparing their procurement strategies, to set out what their general policy is on payment of the Living Wage to persons working on their contracts. 

Engagement with the European Commission on the issue

The Scottish Government has corresponded with the European Commission on a number of occasions about the Living Wage through procurement.

Living Wage Clarification from European Commission

The European Commission has twice confirmed that any requirement on contractors, as part of a public procurement process or public contract, to pay their employees a living wage set at a higher rate than the UK’s National Minimum Wage is unlikely to be compatible with EU law.

The Scottish Government is therefore prevented by EU law from making the Living Wage mandatory in contract agreements and employment law is a reserved matter: