‘Real’ Living Wage Increases – What Does This Mean?

On Monday 11 November 2019, the Living Wage Foundation outlined the new ‘real’ Living Wage rates.

They’ve increased to £10.75 from £10.55 for workers based in London, and £9.30 from £9.00 for those in the rest of the UK. All organisations who provide the ‘real’ Living Wage have until 1 May 2020 to implement these changes. Although, they’re encouraged to do so as soon as possible.

Real Living Wage increases

What is the ‘Real’ Living Wage?

Reviewed each year by the Living Wage Foundation, the voluntary Living Wage is based on the ‘real’ cost of living. It’s set by the Foundation, which is calculated by basing averages on a ‘basket of household goods and services’. Its purpose is to provide workers with higher minimum wage rates than what is currently facilitated by the government. As a voluntary scheme, organisations can choose to opt-in to paying the higher minimum wages. However, once you’ve done so, you must ensure worker salaries fall into line with the rates as set by the Foundation.

What is the benefit?

Providing the ‘real’ Living Wage can be an effective measure of both attracting employees and retaining them. As of 2019, over 6,000 UK businesses have signed up to the scheme, which has resulted in a pay rise for in excess of 180,000 employees. This includes around one third of the FTSE 100, alongside recognisable, high profile operators such as IKEA, ITV and Everton. This new measure can help you find the individuals you need in order to ensure continued company development and progression.

Why is this different to the National Living Wage?

The ‘real’ Living Wage is not to be confused with the National Living Wage (NLW).

The NLW was introduced by the government in April 2016. It’s the statutory minimum hourly rate that should be paid to all workers aged 25 and over, usually increasing every April.

However, the autumn budget has now been delayed due to the upcoming General Election. This means we’re still unaware of what the new statutory rates will be come April 2020.

How does this impact me?

You should make sure they are up to date with these developments.

Those who do not pass on the increases to statutory rates will be operating in breach of the law. This could result in penalty fines of up to 200 per cent of the underpayment, which can be up to a maximum of £20,000 per worker.

Expert support

If you’re uncertain that you’re compliant and would like guidance or support, speak to a Croner expert today on 01455 858 132.