We are all familiar with the terms National Minimum Wage (NMW) which is the Government minimum for under 25’s (under 23’s from April 2021) and the National Living Wage (NLW) which is the Government minimum for over 25’s (over 23’s from April 2021). So what is the Living Wage or more importantly the Real Living Wage?
Put simply, it looks at the real cost of living which is a voluntary rate for those over 18 years old. It takes into account the cost of what people need to get by, rather than a Government generated figure which is based on a target to reach 66% of median earnings by 2024. It is understood that for the national set rates are not enough for some to live on. The Real Living Wage also has a separate rate for London to take into account the higher cost of living in the Capital.
To give an indication of the current rates:
- National Minimum Wage – £8.20 p/h (for those aged 21 or over)
- National Living Wage – £8.72 p/h
- Real Living Wage – £9.50 p/h across UK and £10.85 p/h in London
As you can see there is a difference of £1.30 p/h between someone earning National Minimum Wage and the Real Living Wage across the UK and up to £2.65 p/h for those who live in London. This, once multiplied by the hours worked, would make a real difference to the income of these individuals.
What are the employer benefits of paying this increased rate of pay?
Being accredited as a Real Living Wage employer demonstrates a business is invested in their employees and goes above and beyond their statutory duty to pay the Government set rates. The Real Living Wage website states that of the employers who use the Real Living Wage:
- 86% say it has improved their business reputation
- 75% say motivation and retention rates have improved
- 64% say it has helped to differentiate between themselves and competition
Given the turbulent year of 2020 and the financial difficulties both employers and employees may have faced, it may be time to consider your current hourly rates and to see if there is anything that can be done to increase the rate of pay for those who are currently only earning the National Minimum Wage or National Living Wage. For more information please click here.