The government has been urged to use its influence in supply chains to push for better conditions for staff.
The "Beyond Pay" report – carried out by corporate social responsibility charity Business in the Community with the backing of the Social Mobility and Child Poverty Commission – looks at ways both government and business can act to reduce poverty while improving productivity.
It calls for employers to respond "more comprehensively" to the challenges facing their workforces, and says government should leverage its position in some markets to crack down on the use of agency staff and make improving pay and conditions a priority.
Some civil servants set to lose out on 1% pay rise
Dave Penman: Why the government's got it wrong on "golden goodbyes"
Jeremy Heywood: Civil servants are “realistic” about the need for pay restraint
3 things to consider to make zero-hours contracts work
Government should, the report recommends, improve its procurement processes "to place greater value on quality of service and creation of quality jobs", as well as encouraging better provision and take up of adult skills training.
"Whilst national and local government may not employ many low-paid workers directly, their indirect responsibility for low-paid workers through their supply chain is significant, particularly in the health and social care sectors," the report says.
"In 2014-15, public sector and capital procurement values reached a total of £241 billion, within a GDP of £1,800 billion. The experience of employers involved in the Inquiry who are part of the government’s supply chain suggests that some procurement practices may undermine rather than facilitate the efforts of employers, by prioritising cost or focusing on price alone."
The report's authors say that while the 2012 Public Services (Social Value) Act – which requires certain public bodies to consider the economic, social and environmental wellbeing of an area during the pre-procurement phase – has played a role in boosting access to employment for some disadvantaged groups, more could be done through government action.
"In particular, we recommend ending the use of agencies which manage the contracting process on the government’s behalf in the case where the agencies’ fees are calculated based on cost-saving alone," the report adds.
Alan Milburn – the former Labour cabinet minister who chairs the Social Mobility Commission – said halting the rise rise in working families experiencing poverty would have to be “a shared responsibility between employers and government”.
The report comes as a separate study by the KPMG consultancy found that almost six million workers in Britain are currently paid less than the living wage.
The group found that 23% of employees were now receiving less than the living wage, which is currently set at £7.85 per hour across the country and £9.15 in London.
The proportion has grown 1% on last year, meaning 497,000 more people are earning less than the living wage compared to 12 months ago. Women are more likely to be paid less than the living wage than men, with 29% of female workers earning beneath that level compared to 18% for men.