University of West London: IKEA & Minimum Wage - Management Report

This management report examines IKEA's approach to minimum wage and living wage, considering legal regulations, costs, and benefits. It delves into IKEA's sustainability issues, particularly concerning wood usage and supply chain disruptions exacerbated by the pandemic. The report also highlights the roles of the Equality and Human Rights Commission and the Low Pay Commission in ensuring fair labor practices. Furthermore, it explores Human Resource Management strategies for motivating employees and improving productivity. Recommendations include implementing training and development programs, gathering employee feedback through questionnaires, and focusing on environmentally friendly manufacturing processes. The report concludes that paying minimum wage aims to improve living standards and reduce poverty, emphasizing the importance of government regulations and company initiatives in promoting equality and sustainability in the workplace.

MANAGEMENT REPORT
MINIMUM WAGE LIVING
WAGE

Table of Contents
ABSTRACT.....................................................................................................................................3
INTRODUCTION...........................................................................................................................4
MAIN BODY...................................................................................................................................4
Minimum Wage and Living Wage..............................................................................................4
Current wage rate.........................................................................................................................5
Issues faced by IKEA related to sustainability...........................................................................6
Equality and Human Rights Commission....................................................................................6
Low pay Commission..................................................................................................................7
Human Resource Management approach....................................................................................7
Recommendations........................................................................................................................7
CONCLUSION................................................................................................................................9
REFERENCES................................................................................................................................1

ABSTRACT
The minimum national wage is related to the wages per hour that is given to the workers in UK
and is reviewed annually in April by the government of UK. The main advantage of offering
minimum wage rate is to provide income for the unskilled people which is the step taken by the
government to reduce the poverty. The issue faced by IKEA company related to sustainability is
the product and environment related issue and recommendations is given in order to eliminate
the problems faced by the company.

INTRODUCTION
Management helps in controlling and directing the overall activities and acts of the
organization for the achievement of the goals of the company for which it is incorporated.
Management report helps the managers to inform about the various aspects if the business which
helps the management to take appropriate decisions(Krepysheva, et.al, 2020.). This report will
cover the issue related to minimum wage and living wage of the company IKEA, a home
furnishing retailer its aim, legal regulation, cost. The report also highlights the company's
timescale, cost and prioritization.
MAIN BODY
IKEA company is a home furnishing retailer and is the largest seller of furniture in 21st
century. The company is operating more than 300 stores in different countries around the world.
The company was founded by Ingvar Kamprad Sweden(1943). The company became an
international retailer when it opened its first store in Norway in 1963. The company further
opened its stores in many other countries like : Germany in 1974, Australia in 1975, the United
Kingdom in 1987 etc(Szerakowski, 2017). The main aim of the company is to offer wide variety
and range of well-designed and home furnishing products at vary low prices so that maximum
number of people can afford to buy the products of the company. Furthermore, the company
wants to establish its brand image by manufacturing the environment friendly furniture.
Minimum Wage and Living Wage
The minimum national wage is related to the wages per hour that is given to the workers in UK
and is reviewed annually in April by the government of UK(McBride,et.al, 2018). Minimum
wage is the lowest wage per hour that is paid to the worker in the organization and is the legally
paid price which is paid to the workers. This system was introduced to raise the income level of
the unskilled workers and for underdeveloped countries. The wage is calculated on the hourly
basis and is applicable to all type of jobs in UK. The national minimum wage is decided on the
basis of the age and the workers who are 23 or above are paid national living wage and is
considered as the highest minimum wage(Boeri, et.al, 2020). Apprentices over 19 years of age
are entitled to national minimum wage rate. Casual workers, part-time and temporary workers
are entitled to minimum wage rate whereas the living wage was introduced by Living Wage
Foundation and have two different rates the UK rate and London rate. Generally living wage is

based on the cost of living of a person. The purpose of introducing living wage was to improve
the standard of living of person and middle income families. Living wage refers to the
theoretical income that an individual need to afford adequate food, shelter and necessities for
livelihood. Living wages are generally higher than the minimum wages. The Living Wage
Foundation is a UK based organization that campaigns for the employees to pay living
wages(Berrington, et.al, 2017). The National Living wage is the highest rate of National
Minimum wage which is set by the government and is mandatory to pay to the workers of the
age 23 whereas the Living Wage is set by the UK based organization Living Wage Foundation
and is applied to all the workers who are above the age of 18 and is optional is on the discretion
of the employer whether to pay or not. In 2017, the total numbers of IKEA employees was
149,000 and in 2021 the number of co-workers employees worldwide amounts to 225,000. There
was increase of over 70,000 staff members as compared to 2013.The cost structure of the
minimum wage of IKEA includes the basic rate is included. Sometimes it puts burden on the
company as it has to balance the overall costs. The company has to pay a minimum wage rate to
the employees working at any position in the company. The main purpose for providing the
minimum wage to the workers is to protect the workers employed in the labor force. It is also
designed to raise the standard of living, health and well-being of the workers. It motivates the
workers and improves their performance which positively affects the company. It is mandatory
for the company to pay minimum wage to their employees.
Current wage rate
The current rate for the year April 2021 for the 23 year and above is £8.91 and April 2022 is
£9.50. The current wage rate for the year 2021 of the age group 21 to 22 is £8.36 and April 2022
£9.18. Similarly, for the age group between 18 and 20 the rate is £6.56 and £6.83 and for the age
group under 18 is £4.62 and £4.81. Every country has its own laws and regulations regarding the
minimum wage and living wage set by the government in order to provide better lifestyle and to
improve the standard of living of the people and also for their livelihood.
Minimum Wage is the minimum amount which is received by the workers under the law that is
set by the government that is mandatory for the employers to pay to the labourers and is the step
taken by the government to improve the standard of living of the population associated with the
poverty(Simms, 2017). The benefits of the minimum wage rate depends upon the type of the
market on which it is imposed. The main advantage of offering minimum wage rate is to provide

income for the unskilled people which is the step taken by the government to reduce the poverty
situation in the country. It is observed that higher wages results in increase in the productivity of
the labour and if the company pays higher wages to the labour then they should also focus on the
increasing the production capacity which will affect the economy of the country. Minimum wage
increases the participation of labours in the work which will benefit both the employer and the
labour. Other benefits can include it reduces the taxation burden, helps in improving the standard
of the middle income families and also acts as employment incentive. Living wage can be
beneficial for both the employer and employee. AS an employer paying living wage will help to
improve the productivity and increases the workers loyalty and reduce the extra expenses which
is incurred by the company. The benefits of living wage is that it helps to build the brand image
of the company and also creates satisfaction in the employees if they are valued by the company.
Similarly, for the employees, living wage is the source of income to cover the expenses of the
employees, improves the morale and motivate workers to work hard and put their efforts in the
company. The main purpose is to improve the quality of life of the worker and their family.
IKEA UK became the first largest national retailer to pay its staff minimum of £9.15 an hour in
London and £7.85 across the rest of the UK. All the employers are bound to pay at least the
minimum wage to its employees till the age of 25(Reinecke, et.al,2019). Minimum wage is the
national wage which is sat by the UK government. Many countries have their legal regulations
regarding the national minimum wage for the workers working at the workplace. Very often it is
observed that national minimum wages are not sufficient for the worker for their livelihood. The
company has tied up with the Living Wage Foundation since 2016. Every company operating in
the market faces many challenges and issues which can impact the image of the company and
also its productivity and profitability and is very important for the company to examine these
issues for the long term sustainability in the market.
Issues faced by IKEA related to sustainability
 Wood:This is one of the major issues which is faced by the company. The company has
used 13.56 million cubic metres of solid and wood based materials excluding paper and
packaging and it uses almost 1% wood is used commercially around the world(Everard,
2020). The company has made new strategies of using ethical business practises for the
long term sustainability of the company. Most of the company product is made of
chipboard rather than solid wood.

 Supply chain disruption:The other issue faced due to pandemic was the supply chain
disruption which resulted in the non-availability of the products(Omar, and Fraser,
2020). This situation affected the company as there was rise in prices of the products and
there was less demand of the products due to covid-19. Thus decrease in the demands
affected the profitability of the company.
Equality and Human Rights Commission
Equality and Human Rights Commission is a non- departmental body in England and Wales
which was enacted under the Equality act 2006 and came into force on 1 October 2007. The
main aim was to promote and enforce the equality and non-discrimination laws in the country.
It monitors the human rights and protect the rights based on nine grounds such as age, disability,
race, religion etc.
Low pay Commission
Low pay commission(LPC) is an independent body which was established in 1997, United
Kingdom whose main aim is to advice the government on the matters related to National
Minimum Wage. It is a non- departmental public body and its chairman is Bryan Sanderson.
Human Resource Management approach
HRM Approach is the strategic approach for the efficient management of the company which
helps the company to gain competitive advantage over other competitors in the market(Stewart,
et.al,2019). It is basically designed to enhance the performance of the employees and
encouraging the employees in order to increase the capacity of the production. The main aspect
the of this approach is to motivate employees so that they can put their maximum efforts and also
improve their performance(Boselie, et.al, 2018). This will also help for the personal development
of the employees. If the IKEA company appreciated the employees and organize various training
programs for the development of their employees, this will help to enhance the performance of
the employees and also achieving the goals of the company.
Recommendations
Recommendation
1. Training and
development programs
Rationale
Boosts the morale of
the employees and
encourage the workers
Priority
2
Cost and Timescale
£15,000 on training
and development
programs every nine

2. Feedback from
employees
3. Focus on
environment
protection
to improve their
performance and for
personal development
of employees.
To identify the areas in
which the company is
lacking and improve
the areas through
questionnaires
The company should
use the products which
are eco-friendly or
cause less negative
impact on the
environment.
3
1
months.
Questionnaires are
prepares by the
management and extra
expenses incurred.
Not much expensive
and less cost in
manufacturing
process.

CONCLUSION
From the above report it can be concluded the main aim of paying minimum wage to the
workers id to improve the standard of living and an attempt to reduce the poverty in the
underdeveloped countries. The regulations related to the minimum and living wages are set by
the government which duffers form country to country. The commissions formed by the
government helps to build the standard of living and promotes equality in the workplace. The
company should take steps in order to build its image and also for the long term sustainability of
the company.

REFERENCES
Books and journals
Krepysheva, et.al, 2020. Definition and measurement of risk in compliance management.
Strategic decisions and risk management.
Szerakowski, C., 2017. Transitioning IKEA Towards a Circular Economy: A Backcasting
Approach (Master's thesis).
McBride,et.al, 2018. ‘You end up with nothing’: The experience of being a statistic of ‘in-work
poverty’in the UK. Work, employment and society.32(1). pp.210-218.
Boeri, et.al, 2020. Solo self-employment and alternative work arrangements: A cross-country
perspective on the changing composition of jobs. Journal of Economic
Perspectives.34(1). pp.170-95.
Berrington, et.al, 2017. Youth social citizenship and class inequalities in transitions to adulthood
in the UK.
Simms, M., 2017. Unions and job quality in the UK: Extending interest representation within
regulation institutions. Work and Occupations.44(1). pp.47-67.
Reinecke, et.al,2019. Business models and labour standards: making the connection. Ethical
Trading Initiative, London.
Everard, M., 2020. Twenty years of the polyvinyl chloride sustainability challenges. Journal of
Vinyl and Additive Technology.26(3). pp.390-402.
Omar, O. and Fraser, P., 2020. Small and medium-sized enterprise retailing in the UK. In
Entrepreneurship Marketing(pp. 202-221). Routledge.
Stewart, et.al,2019. Human resource management. John Wiley & Sons.
Boselie, et.al, 2018. Comparing performance management across contexts. In Handbook of
research on comparative human resource management. Edward Elgar Publishing.
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