Reviewed each year by the Living Wage Foundation, the voluntary Living Wage is based on the ‘real’ cost of living as is 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 but, once they have done so, must ensure worker salaries fall into line with the rates as set by the Foundation.
These increases are as follows:
- London Living Wage – increases by 1.8 per cent from £10.55 to £10.75 per hour
- UK Living Wage – increases by 3.3 per cent from £9.00 to £9.30 per hour.
Going forward, all organisations who provide the ‘real’ Living Wage will now have until 1 May 2020 to implement these changes, although they are encouraged to do so as soon as possible. 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.
Although voluntary, providing the ‘real’ Living Wage can be an effective measure of both attracting employees to an organisation and retaining them. With Brexit uncertainty continuing to dominate the headlines, organisations may wish to consider introducing new measures that can assist them in finding the individuals they need to in order to ensure continued company development and progression.
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 and is the statutory minimum hourly rate that should be paid to all workers aged 25 and over. As the previously expected autumn budget has now been delayed due to the upcoming General Election, we still are unaware of what the new statutory rates will be come April 2020.
That said, organisations 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.