What is the Real Living Wage?
The Real Living Wage is an independently calculated hourly rate based on the cost of living. It is higher than the government’s National Living Wage.
The Real Living Wage is not mandatory for UK employers. It is a voluntary commitment by employers to pay their workers a wage that reflects the true cost of living. The rate is calculated and set by the independent Living Wage Foundation, taking into account the actual costs of living.
What are the changes?
The Real Living Wage, as determined by the Living Wage Foundation, has recently increased by 5% to Ā£12.60 per hour nationally and 5.3% to Ā£13.85 per hour in London. This significant increase will directly benefit nearly 500,000 employees across over 15,000 businesses committed to paying this voluntary rate.
This pay rise is intended to help workers cope with the ongoing challenges of rising inflation and the increasing cost of living. Importantly, the Real Living Wage applies to all workers aged 18 and over, unlike the government’s national living wage, which only applies to those aged 21 and above. The government is currently working towards phasing out the lower minimum wage for 18- to 20-year-olds.
Research conducted by the Living Wage Foundation highlights the pressing need for this increase, revealing that 42% of workers earning below the Real Living Wage have less than Ā£10 per week left after covering essential expenses such as rent, bills, and transportation. While this increase is a crucial step, many employers are still hesitant to offer significant pay raises, with the median pay award forecast to drop to 3% in 2025.
Despite this cautious outlook, the number of businesses committed to the Real Living Wage is steadily increasing. However, it’s important to note that some high-profile companies have recently withdrawn from the scheme.
The Real Living Wage offers several benefits to both workers and employers. It helps to ensure workers can afford a decent standard of living, improves employee well-being and job satisfaction, and can attract and retain top talent. Additionally, it enhances a company’s employer brand by demonstrating a commitment to social responsibility and employee well-being.
Beyond wages, the Living Wage Foundation also promotes complementary initiatives such as Living Hours and Living Pension. Living Hours aims to guarantee a minimum of 16 hours per week, predictable shift patterns, and contracts that accurately reflect the hours worked. The Living Pension initiative recommends an employer pension contribution of at least 7%.
Katherine Chapman, Director of the Living Wage Foundation, emphasised the significant positive impact of these new rates on workers struggling with the cost of living. Darren Taylor, Country People and Culture Manager at IKEA UK&IE, expressed optimism that this uplift, combined with the company’s enhanced flexibility and benefits offerings, will provide employees with greater financial stability and support for a better quality of life.
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