Living Wage rises: an opportunity to rethink FM contracts and unlock better value
The new real Living Wage rates reinforce the importance of fair pay for frontline facilities management teams. For clients and service providers, they also highlight the need to review how services are specified, organised and contracted to deliver sustainable value.
The Living Wage Foundation has announced its rates for 2026–2027, with the UK rate increasing to £14.10 per hour, up 4.8%, and the London rate rising to £15.45, up 4.4%. Both represent an increase of 65p per hour.
The real Living Wage is independently calculated around living costs and is a voluntary commitment, separate from the Government’s statutory National Living Wage. Accredited employers are asked to implement the new rates as soon as possible and by 1 May 2027 at the latest.
For labour-intensive FM services, including cleaning, security, catering and portering, the increases create additional financial pressure. Sitemark believes the response should combine fair pay with a closer examination of how services deliver value.
A shared challenge for clients and providers
Service providers face higher payroll costs and associated employment on-costs, potentially squeezing margins and limiting investment. Clients must balance these pressures against available budgets and expectations for service quality.
A wage increase does not automatically translate into the same percentage increase in the total contract price. The impact depends on the proportion of costs attributable to affected employees, existing pay rates, associated costs and contractual pricing provisions.
Understanding that impact is the starting point. The next step is to establish whether the service specification and delivery model make the best use of those resources.
Review the specification, not just the price
Input-based specifications often prescribe staffing numbers, hours and task frequencies. Where these requirements have become disconnected from building use or operational need, they can lock both parties into inefficient working practices.
They can also discourage innovation: a provider that achieves the required standard in fewer hours may still be contractually obliged to supply the original staffing input.
Output- and outcome-based specifications give providers greater freedom to improve delivery while remaining accountable for results.
For example, a cleaning specification can define measurable cleanliness standards and required availability of spaces, with outcomes linked to safe, welcoming environments. The provider can then propose the deployment, equipment and methods needed to achieve them.
This approach requires clear performance measures, effective monitoring and safeguards for safety, compliance and workforce wellbeing. Minimum staffing or attendance requirements may still be necessary for particular services.
Sitemark’s best practice benchmarking helps establish whether specifications reflect actual needs, whether required standards are being achieved and where different working methods could improve efficiency.
Structure contracts to enable investment
Contract structure can also create opportunities to offset rising costs.
Consolidating compatible services into one contract can reduce duplicated management, supervision, administration and mobilisation costs. It can also enable shared technology, better coordination and appropriately trained teams working across service boundaries.
The benefits depend on the services and sites involved. Consolidation should preserve specialist competence, clear accountability and sufficient visibility of each service’s cost and performance.
Longer contract terms can strengthen the business case for innovation. Equipment, automation, digital systems and workforce development often require investment upfront, with benefits delivered over several years.
A longer period allows that investment to be amortised over more of the contract’s life, potentially reducing its annual cost and making improvements commercially viable. Clients gain greater access to innovation, while providers have more certainty to invest.
Longer terms should be supported by measurable improvement commitments, performance reviews and appropriate break provisions, so that contract security delivers continuing value.
Independent evidence for a joint improvement plan
Sitemark’s independent benchmarking assesses effectiveness and efficiency together, examining service quality, costs, productivity, specifications and operational practices.
For clients, this provides evidence to assess proposed increases, challenge outdated requirements and identify better value delivery options.
For providers, it helps substantiate genuine cost pressures, demonstrate efficient performance and build a credible case for investment and contract development.
Together, both parties can agree a practical improvement plan, with clear responsibilities, measurable benefits and an understanding of how investment costs and savings will be shared.
The opportunities vary. Some services may have substantial improvement potential; others may already operate efficiently and require additional funding. Benchmarking establishes that position without assuming every wage increase can be fully absorbed.
Fair pay and efficient FM delivery are compatible ambitions. Reviewing specifications, service packaging and contract duration can help clients and providers support both.
Contact Sitemark to explore how best practice benchmarking could help you manage rising labour costs, unlock investment and improve service performance.