Employment Update: The Real Living Wage

09 Nov 2018

A rise in the real Living Wage was announced this week, with around 180,000 workers set to receive a pay boost as a result.

The real Living Wage is a voluntary scheme that pays employees by reference to the real cost of living. It was designed by the Living Wage Foundation as a seemingly fairer alternative to the compulsory National Living Wage. The National Living Wage is calculated at 55% of the median wage and, according to the Living Wage Commission, fails to cover families’ basic needs. The real Living Wage, on the other hand, is an independently-calculated wage based on a basket of household goods and services. It takes into account factors such as housing, food, clothing and commuting costs. In contrast to the National Living Wage, the real Living Wage has a separate higher rate for London and does not exclude younger workers. The real Living Wage applies to those aged 18 and older, whereas the National Living Wage only applies to those aged 25 and older.

As of this week, the real Living Wage has risen by 35p in London to £10.55 per hour and 25p elsewhere in the UK to £9 per hour. In contrast, the National Living Wage is currently set at £7.83 per hour, rising to £8.21 per hour in April 2019. Employers that subscribe to the real Living Wage have until May 2019 to implement the pay rise, however it is expected that many will do so immediately.

As it stands, over 4,700 employers have signed up to the real Living Wage, including 1/3 of the FTSE 100 companies and household brands such as Google, IKEA and several premier league football clubs. Accredited companies report both ethical and economic benefits. According to Living Wage Foundation director Tess Lanning, "employers paying the real Living Wage enable their workers to live a life of dignity, supporting them to pay off debts and meet the pressures of rising bills". Real Living Wage employers have seen increases in quality of work and enhanced reputations, as well as greater staff retention, productivity and morale.

With these company reported benefits, coupled with findings that an overall £809m in extra wages has gone to low-paid workers as a result of the movement, it is unsurprising that the scheme is growing in popularity amongst employers and employees alike.

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