Living Wage Week – but what is a living wage?

13th November 2019

This is Living Wage Week, marking the voluntary rate of pay set by the Living Wage Foundation (LWF) charity that is actually a higher rate of pay than the government’s own National Living Wage (NLW).

The LWF says its hourly rate is £9.30 per hour in most of the UK and £10.75 in London for the year 2019/20.

Over 200,000 workers benefit from the LWF in the 6,000 businesses that have signed up to the voluntary scheme.

Currently, the government-set NLW is £8.21 per hour for workers aged 25 and over. This took effect from 1 April 2019 and is based on median earnings of £585 a week.

The government wants to set its NLW at 60 per cent of median earnings by 2020, which under current forecasts means a rise to around £9 per hour.

The LWF rates, in contrast, are higher to take account of such matters as the rental costs and childcare expenses workers incur.

Whilst the current government wants to increase the minimum rate of the NLW to £10.50 for workers aged 21 and older by 2024, the Labour Party has pledged to introduce a £10 minimum rate with immediate effect.

Budget

The Chancellor’s Budget planned for 6 November would have announced the NLW from 1 April 2020, but this event was cancelled due to the general election.

Whatever the outcome of the election, employers will need to know what the rates of pay will be from April next year for both the NLW, and the National Minimum Wage paid to those under 25.

The current Chancellor has said that he is looking at reductions in National Insurance Contributions as another way of helping the low paid.

Impact

The impact on employers of further wage inflation has yet to be fully analysed, and some sectors may struggle more than others, particularly in labour-intensive industries such as the care sector, retail and hospitality.

Other factors affecting pay include the performance of the UK economy, productivity and the effects of Brexit on the recruitment of workers.

If you would like to discuss how your payroll may be affected by the living wage, please contact a member of our payroll team or your usual Bishop Fleming advisor.

Bishop Fleming Payroll Services can help you to make sure that you are paying your staff at the correct rate.

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