15th November 2021
The National Living Wage vs the Real Living Wage – what’s the difference?
This week (15-21 November 2021) is Living Wage Week. Taking place every November, Living Wage Week celebrates employers who pay the Living Wage Foundation’s ‘Real Living Wage’ and encourages others to do so.
This year’s Living Wage Week began with the announcement that the voluntary Real Living Wage is rising to £9.90, reflecting the amount the Living Wage Foundation believes people need to live on, including the costs of fuel, energy, rent and food. It said this year’s rate had been mostly driven upwards by rising fuel costs, as well as higher rents.
But this announcement will undoubtedly bring confusion to many, as it was only two weeks ago that the government announced, with much fanfare, that the National Living Wage would rise to £9.50 for workers over the age of 23 from next April, so how come these amounts are different and how much should workers expect to be paid? The answer to this question comes from understanding the difference between the National Living Wage and the Real Living Wage because, despite the similarity in their name, they are most definitely not the same thing.
National Living Wage (and National Minimum Wage)
The National Living Wage (NLW) and National Minimum Wage (NMW) are the statutory minimums that an employer must pay its employees meaning that, by law, an employer must pay at least the:
- NLW to workers aged 23 or over
- NMW to workers aged under 23 or an apprentice
The NLW was previously for those aged over 25 but this was changed from 1 April 2021, and it now also applies to those aged 23 and 24. The current NLW rate is £8.91 which rises to £9.50 next April for workers over 23. There are different NMW rates which depend on the age of the worker. You can see all the NMW rates set out in full in my previous blog.
The rate of NLW and NMW is based upon recommendations from the Low Pay Commission (LPC). The LPC is an independent public body that advises the Government each year on the rates of the NMW including the NLW. The LPC is a social partnership body, made up of nine commissioners: three from employer backgrounds, three from employee representative backgrounds, and three independents, including the Chair. The LPC aims to recommend rates as high as possible without damaging the employment prospects of workers. And this is an important consideration because, despite the Government’s claims that it is helping the low paid by increasing the NMW rates, we must remember that actually the Government isn’t giving any employees anything at all, it is employers who must pay for the increase in wages, and there is always a risk that increased NMW rates could present real difficulties for some employers who are only just able to keep their heads above water, and may result in redundancies or lower recruitment.
That being said, there are also employers who choose to pay workers the minimum (and sometimes less than that if the naming and shaming lists are anything to go by).
The Real Living Wage
The campaign for a real living wage began 20 years ago at a meeting in East London, when the grassroots organisation Citizens UK brought together churches, mosques, schools and other local institutions to talk about the issues affecting their communities. One issue came up again and again – low pay. At the time the Government’s minimum wage was just £3.70 an hour, with some people working two or three minimum wage jobs and still struggling to make ends meet.
In 2004, Citizens UK persuaded the Mayor of London to help champion the Living Wage across the capital, and by 2011 the movement went national. The first UK Living Wage rate was set, and the Living Wage Foundation was created to recognise and celebrate the great businesses that choose to pay more than the Government minimum.
Today there are around 9,000 employers who have voluntarily signed up with the Living Wage Foundation to pay around 300,000 employees across the country a Real Living Wage. The increase today sees the national Real Living Wage rate increased by 40p to £9.90, while workers in London will see their pay rising by 20p to £11.05.