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Voluntary living wage increase - Does it affect you?


Posted on 15 November 2016

The UK voluntary living wage, otherwise known as the ‘real living wage’, is to rise by 20p an hour. The real living wage is separate to the governments National Living Wage, which was introduced in April this year. So what is it?

  • The real living wage is independently-calculated each year based on what employees and their families need to live, by the Resolution Foundation, a not-for-profit research and policy organisation. It is overseen by the Living Wage Commission, which is appointed by the Living Wage Foundation, and includes representation from employers, trade unions, civil society and independent experts.
  • Employers choose to pay the real Living Wage on a voluntary basis.
  • The current National Living Wage is £7.20 per hour for employees aged 25 and above.
  • The UK Living Wage will be £8.45 an hour.
  • The London Living Wage will be £9.75 an hour.
  • The rates apply to all workers over 18 – in recognition that young people face the same living costs as everyone else.
  • The real Living Wage that meets the cost of living enjoys cross party support, with public backing from successive London Mayors and MPs across the four nations of the UK.

According to figures from the Living Wage Commission, one in five people earn less than the wage they need to get by. It is felt that the real living wage goes some way to improving conditions for the lower paid. The hope is that ultimately this will improve community and family life across many regions. Nearly 3,000 businesses are currently signed up to the scheme, including Ikea and EDF with a number of new companies announcing their commitment to pay the living wage.

If you are an employer, you are currently required to pay the National Living Wage but not the real living wage. The real living wage is a voluntary commitment. The Living Wage Foundation has reported that employers that have subscribed to the voluntary extra payment have reported improvements in quality of work, staff motivation and reductions in staff absenteeism. So it may be an option for your business.

If you want to know more about the ‘real living wage’ or the National Living Wage contact Smith Cooper.

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