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News added on 09.11.2020

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Living Wage Foundation announces annual increases to real Living Wage

The Living Wage Foundation has announced that its UK Living Wage has risen from £9.30 to £9.50 per hour and its London Living Wage has risen from £10.75 to £10.85 per hour. How is this different to the national living wage?

The Living Wage, often called the real Living Wage, is entirely separate from the government’s mandatory national living wage (NLW) and national minimum wage (NMW). The NLW is currently £8.72 per hour for those aged 25 and over and the NMW is currently £8.20 per hour for those aged 21 to 24, with lower NMW rates applying to those above school leaving age but under 21 and to apprentices.

Conversely, the real Living Wage is an hourly rate which is calculated independently according to the real cost of living in the UK, based on a basket of household goods and services, and it’s updated annually, with the new rates being announced in November each year. There are two rates, one for London, which covers all the Greater London boroughs and allows for London weighting, and one for the rest of the UK. The real Living Wage is set by a formula calculated by the Resolution Foundation, based on the best available evidence on living standards in the UK and in London. The real Living Wage rates are higher than the NLW and NMW rates because they’re calculated based on what workers need to get by, not just the government minimum. Employers choose to pay the real Living Wage on a voluntary basis, i.e. you don’t have to pay it if you don’t want to or can’t afford to, and according to the Living Wage Foundation a fifth of all employees are still paid under it.

The new real Living Wage rates are £10.85 per hour in London (a 10p increase) and £9.50 per hour across the rest of the UK (a 20p increase). Over 250,000 workers are set for a pay rise as a result of the announcement. The rates apply to workers aged 18 and over; there are no reduced rates for those who are under the age of 18.

Accredited Living Wage employers are required to implement the rises as soon as possible and within six months. This means that all affected workers should receive the new rates by 9 May 2021. Only guaranteed non-deferred payments can be included in the real Living wage rates, so this would exclude employer pension contributions, non-guaranteed bonuses, sales-related commission, accommodation costs, etc.

The total number of accredited Living Wage employers currently stands at almost 7,000 nationally, of which more than 2,000 are in London. These range from large FTSE 100 companies and major household names to small businesses. The accreditation is a signed licence between the Living Wage Foundation and the employer, under which the employer is awarded the Living Wage Employer Mark.

Finally, the government hasn’t yet announced what the new NLW/NMW rates will be from 1 April 2021, but it’s anticipated by many forecasters that the rises will not be as high as may otherwise have been the case, due to the current economic climate caused by the coronavirus pandemic. It had been expected that the rates would be announced as part of the 2020 Autumn Budget, but now that has been cancelled due to the pandemic, it’s not clear exactly when they will be announced.

The real Living Wage is a purely voluntary hourly pay rate which is calculated independently of government according to the real cost of living in the UK. If you do wish to pay at least this rate to all your staff, you can apply to be accredited as a Living Wage employer. Accredited Living Wage employers must now implement the latest rises (to £10.85 per hour in London and £9.50 per hour elsewhere) by 9 May 2021.

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