Scarborough Council has warned that it would have to cut services if councillors decided to implement the UK Living Wage across the board.
Under pressure from the Labour group, the authority has carried out a review of its pay structure.
Cllr Liz Colling (Labour) asked the council to bring in the UK Living Wage (UKLW) in November, which now stands at £8.75 per hour.
Now, a report which will go before the council’s cabinet today has cautioned over the costs of such a move and the possible impact on services.
The report, written by HR manager Elaine Blades for chief executive Jim Dillon, said: “Based on current pay rates adopting a Living Wage of £8.75 would extend the staff eligible to receive the pay supplement to employees paid at the bottom spinal column point (SCP, the council’s pay structure) of Scale 3.
“This would, therefore, result in a large increase in the number of employees receiving the pay supplement i.e. approximately 165 from 22 at the present level and also have a significant impact on pay differentials.
“If the council wishes to apply the current UKLW rate it will result in an additional cost of approximately £104,000 per annum.”
The issue then becomes that some staff on lower pay bands could end up making more money than their boss.
The report adds: “In order to address this, pay differentials could be adjusted for all staff in line with the UKLW percentage increase although this would be extremely expensive; an approximate annual cost of between £938,000 and £1.7 million per annum (between a 6.8% and 12.4% increase), depending on how the bottom of the pay spine was structured.
“This is unaffordable for this council without significant cuts to service.”
One solution, according to the report, is to wait until the conclusion of talks with employment unions over implementing a National Living Wage pay scale nationally, which is likely to be lower than the UK Living Wage.
However, in the event that an agreement is not achieved by 1 April 2018 the council would revise its minimum hourly rate to £7.83 per hour in line with the statutory National Living Wage.
After reading the report due to be tabled at Cabinet next week, Cllr Steve Siddons, Leader of the Labour Group said: “Council made a clear and simple request – we agreed paying council employees less than the Real Living Wage was unacceptable and asked for a budget that addresses this concern. Instead the Cabinet next week is presented with a series of smoke and mirror excuses not to pay our employees a wage they can live on.
“Cabinet members must ignore this fog and recommend a budget that both sets an example to all the Borough’s employers and starts dragging Scarborough away from being the country’s low wage capital.
“If they don’t they will let down the Council and more importantly every current and future worker in Scarborough, Whitby and Filey.”