‘A hard day’s work deserves a fair day’s pay’ – the Living Wage Foundation.
It sounds confusing but the ‘Living Wage’ is different from the ‘National Living Wage’. The ‘National Living Wage’ was introduced by the Government in 2016 and is one of the National Minimum Wage rates for workers aged 25 and over.
Along with other National Minimum Wage rates, the National Living Wage rate is set each April by the Government and is a legal requirement. Employers who don’t pay it and are identified are liable to repay any underpayments for the previous six years, will face financial penalties of up to £20,000 per worker and will suffer reputational damage from being publicly named and shamed. The current National Living Wage rate is £7.50 p/hr. You can read more about complying with the National Living Wage here.
With inflation on the up, real term pay increases have left households with a lower disposable income; the issue that the Living Wage seeks to address. The Living Wage is an hourly pay rate which employers can volunteer to pay if they wish. It is not a legal requirement. It is calculated independently by the Resolution Foundation which is overseen by the Living Wage Commission. There are two variances for this rate, the London Living Wage, taking into account the higher cost of living in Greater London and the Living Wage for the rest of the UK.
The Living Wage also recognises that those who are under 25 may still have the same level of living costs as those 25 and over. The Living wage is therefore applicable to anyone over 18.
How much is the Living Wage?
As part of the annual Living Wage Week, the Living Wage rates for 2017 were released on Monday 6 November 2017. The London Living Wage is now £10.20ph. The Living Wage for the rest of the UK is now £8.75ph.
How does the Living Wage compare with pay forecasts?
In percentage terms, workers receiving the Living Wage will benefit from a significantly higher increase than other workers, with an increase of 4.6 per cent in London and 3.6 per cent across the rest of the UK. This is in contrast to the expected average private sector wage rise of approximately 2 per cent.
Should I pay the Living Wage?
The Living Wage Foundation publish some interesting facts based on information gained from accredited Living Wage employers and their workers:
- 86 per cent say it has improved the reputation of the business;
- 75 per cent say it has increased motivation and retention rates for employees;
- 64 per cent say it has helped differentiate themselves from others in their industry;
- 58 per cent say it improved relations between managers and their staff; and
- workers stress the benefits of having a greater work life balance.
In addition, Living Wage employers are visible on the Living Wage Foundation website, receive a Living Wage employer plaque to display on premises, receive regular information regarding Living Wage news and gain the right to use the Living Wage Employer Mark on their website and paperwork - a great visual to attract potential new business and new talent.
RSM’s legal and HR teams can help you to understand how the Living Wage and National Living Wage might impact or assist your business growth, and you can find more information at https://www.livingwage.org.uk/.