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As an employer, you should be aware that you have legal requirements to pay your staff a minimum wage. This is the National Minimum Wage or National Living Wage. The value you owe depends upon your staff’s age. However, you may be less familiar with the term Living Wage or Real Living Wage, which is not a legal requirement and not directly related to either the National Minimum Wage or National Living Wage. Unfortunately, sometimes the term National Living Wage is termed the ‘Living Wage’, and as a result, you may find yourselves confused.
This article will explain what the Living Wage is and what you as an employer need to know about it. It also helps you understand how this is not the same as the National Living Wage and shows some key differences between the two.
What is the Living Wage?
The Living Wage is a voluntary UK rate of pay you may choose to pay your staff, reflecting actual living costs. It was launched by Citizens UK in 2001 with the support of independent businesses, organisations, and citizens. Ultimately, Citizens UK’s motive was that a hard day’s work deserves a fair day’s pay.
The Living Wage has been calculated independently from the Government to reflect the cost of living and meeting everyday needs. The calculations reflect a basket of services and household items. Likewise, a separate rate exists for London, which applies to all boroughs in Greater London.
If you choose to pay the Living Wage, it applies to all directly employed staff over the age of 18 years. Notably, it does not matter how many hours they work for you. As it is a voluntary rate, it is not a legal requirement to pay the Living Wage, so it is up to you whether you wish to do so.
Is the Living Wage the Same as the National Living Wage?
The Living Wage is not the same as the National Living Wage. However, the Living Wage was inspired by the National Living Wage.
The National Living Wage is a legal minimum wage those over 23 years should receive. Therefore, as an employer, you have legal obligations to pay your applicable staff this rate. Likewise, the National Living Wage does not base its rate upon living standards and meeting everyday needs. It is calculated based on a target that the Government believes businesses can afford to pay their staff at an hourly rate.
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Why Choose to Pay Your Staff the Living Wage?
Whilst paying your staff the Living Wage is not a legal requirement, many businesses choose to be responsible employers and do so. The Living Wage Foundation states that where staff receive the Living Wage, they can access a decent standard of living, including access to:
- healthy food; and
- heat in their homes.
As an employer, you may see benefits through your business if you pay the Living Wage. For example, employers paying the Living Wage have noted the following benefits:
- lower staff turnover;
- staff feeling valued; and
- staff working harder as they feel valued.
Additionally, if you choose to pay your staff the Living Wage, you can become an accredited Living Wage Employer. However, you must pay all staff you directly employ the relevant Living Wage rate to qualify for this. You will also need to plan how you will later pay regular sub-contracted staff the Living Wage.
Living Wage vs National Minimum Wage vs National Living Wage
The table below clearly sums up some of the main differences between the Living Wage and the Government’s legal requirements for what you must pay your staff.
| Living Wage | National Minimum Wage | National Living Wage |
| Based on what is needed for a person to meet their living needs and is paid for those aged 18 years and over. | The government minimum amount you must pay staff under 23 years. | The government minimum amount you must pay staff over the age of 23 years. |
|
£9.90 for the UK £11.05 for London |
£8.36 | £8.91 |
| A voluntary amount you can pay your staff. | A legal requirement you pay your staff of the relevant age. | A legal requirement you pay applicable staff of the relevant age. |
| The Living Wage has a London Weighting element to it. | There is no London Weighting. | There is no London Weighting. |
| Based according to the cost of living. | Set as a result of a negotiated settlement with recommendations from businesses and trade unions. | Set according to median earnings targets. |
Key Takeaways
It is essential that you know that the Living Wage or Real Living Wage is different from the National Minimum Wage and National Living Wage. The Living Wage is not a legal requirement. Therefore, you as an employer can choose whether you meet the level set by the Living Wage when paying your staff. However, the National Minimum Wage and the National Living Wage are legal requirements, so you must pay your staff who qualify for the applicable rates. Whilst the Living Wage is not a legal requirement, there are reasons why you may choose to pay it. It is based on the actual level of living in the UK, and paying it has been evidenced to lower staff turnover and improve staff productivity. By paying the Living Wage, you could qualify for accreditation as a Living Wage Employer.
If you need help understanding the Living Wage in England and Wales, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
The National Living Wage is the legal average rate of pay you must pay your staff aged 23 years old and over where they qualify for it.
The Living Wage, sometimes termed the Real Living Wage, is a voluntary pay rate for those aged 18 years and over. This rate is based on the cost of living in the UK. It is not a legal requirement to pay your staff the Living Wage.
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