1st April 2016 will see the introduction of a new statutory minimum wage for over 25s, which the government is referring to as the 'national living wage' (NLW). This is not to be confused with the Living Wage which is a voluntary payment by employers at a higher rate than the NLW, and which applies to all working adults above the age of 18.
This briefing note provides guidance around the various different wage rates that employers must pay by law from April 1st in order to comply with the NLW, as well as the Living Wage which means paying higher voluntary rates. These are the rates outlined below which Living Wage Foundation (LWF) accredited employers pay their staff.
The Living Wage Foundation has 2,300 accredited Living Wage employers across the UK. These are employers who commit to paying their staff at least the voluntary Living Wage.
What is the Living Wage?
The Living Wage commitment sees everyone working at an employer, regardless of whether they are permanent employees or third-party contractors; receive a minimum hourly wage of £8.25, and £9.40 in London - significantly higher than the national minimum wage of £6.70. The Living Wage is an hourly rate, set independently and is based on the cost of living. The Living Wage is for all employees over the age of 18, whereas the new enhanced minimum wage rate is for over 25s only. New rates are announced in Living Wage Week in November every year.
What is the New Minimum Wage AKA National Living Wage?
The new minimum wage rate sometimes referred to as the 'national living wage', will be £7.20 per hour. This will increase each year, with the aim of reaching 60% of the median wage across the country by 2020 (this would mean around £9 an hour, but the Low Pay Commission will consider what the market can bear). It will not increase in line with the cost of living and will only apply to adults over the age of 25 impacting around 1.8 million people (according to the Low Pay Commission) as opposed to the 5.84 million people who currently earn below the Living Wage.
About the Living Wage Foundation
The Living Wage Foundation recognises and celebrates the leadership shown by Living Wage employers across the UK. The Foundation believes that work should be the surest way out of poverty.
The LWF is an initiative of Citizens UK. We receive guidance and advice from the Living Wage Advisory Council. The Foundation is supported by ten principal partners:
Aviva; Joseph Rowntree Foundation; KPMG; Linklaters; Nationwide; Nestle; Resolution Foundation; Burberry; GSK; Trust for London and Queen Mary University of London.
The Living Wage is an hourly rate set independently and updated annually. The Living Wage is calculated according to the basic cost of living in the UK. Employers choose to pay the Living Wage on a voluntary basis. The Living Wage enjoys cross party support.
The London Living Wage figure is set annually by the Greater London Authority and covers all boroughs in Greater London. The UK Living Wage for outside of London is currently issued annually by the Centre for Research in Social Policy at Loughborough University.
Explanatory tools are included below, with attachments available upon request.
Media enquiries and requests for Living Wage employers and employee case studies to:
Esmat Jeraj, Media & Communications Officer, Citizens UK
esmat.jeraj@citizensuk.org M: 07809608786
1. Shareable infographic explaining the different rates
2. Infographic on the benefits of the Living Wage
3. An easy to read table comparing the differences
The National Minimum Wage
(including the 'national living wage')
The Living Wage
The legal minimum an employee can earn in an hour. Employers break the law if they fail to pay this rate
A voluntary rate that employers commit to pay in order to go above and beyond. The Living Wage Employer Mark is a sign of best practice
The 'national living wage' rate will be £7.20 an hour
The current UK Living Wage is £8.25 an hour.
The current London Living Wage is £9.40 an hour
This will increase each year, with the aim of reaching 60% of the median wage across the country by 2020 (this would mean around £9 an hour but the Low Pay Commission will consider what the market can bear)
This will increase in line with the cost of living with increases announced in Living Wage Week every year
Different rates apply depending on the age of the employee. The 'national living wage' is for over 25s only
The Living Wage is the same for all employees over the age of 18
Set by the Low Pay Commission
Set by the Living Wage Foundation
Based on an estimation of what the market can bear
Based on the cost of living
The rates are the same right across the UK
There is a separate rate for London to reflect the higher cost of living in the Capital