The BBC news today carried the story of a rise to the Living Wage, and I suspect that this news may have confused many of our followers more than a little. So I thought a few lines of explanation might come in handy.
The Living Wage referred to in the media today is not that announced by The Chancellor in his Summer Budget Speech. Mr Osborne’s announcement referred to the (admittedly similarly named) National Living Wage (NLW), which is a legally binding minimum level of hourly pay from April 2016.
The National Living Wage is essentially an extension of the existing National Minimum Wage requirements that are already in force (and will continue to apply in some cases even after the introduction of the NLW). For more information on this issue - including the impact on employee benefit provision - please see our post from the 1st September.
So what is the Living Wage referred to by the BBC today?
The short answer is that the Living Wage is essentially an advisory minimum level of hourly pay that is set by the Living Wage Foundation. Unlike the NLW, the aim is to calculate the minimum income that a worker and his/her family needs to achieve a basic living standard. So the Living Wage probably represents a more realistic benchmark for minimum wage levels, and despite not being dictated by law the movement is growing with more than 2,000 UK employers currently committed to meeting these standards.
I hope the above helps explain the key differences between the various minimum wage definitions. This is sure to be a subject we return to both here and in our seminars – particularly as the introduction of the NLW grows ever closer.
Best regards
Steve
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