By now most UK employers will be fully conversant with the requirements of both the National Minimum Wage (NMW) and National Living Wage (NLW). Both of these measures are imposed by legislation, and dictate the legal minimum level of payment that employers must pay per hour in exchange for the work done by each employee. For a full listing of the currently applicable rates please see this earlier post from the Jelf Blog.
The move towards a guaranteed minimum income is of course a welcome one for the millions of working people and families that it benefits, but it may be a mistake to think that incomes on either NMW or NLW are in themselves sufficient to ensure an adequate standard of living.
Which is why the on-going work being undertaken by the Joseph Rowntree Foundation (JRF) in this area is so important. Since 2008 they have been looking in detail at this issue, and they have focused not on the legal minimum income, but instead their own measure known as The Minimum Income Standard.
The Minimum Income Standard (MIS) is defined by JRF as follows:
“A minimum standard of living in the UK today includes, but is more than just, food, clothes and shelter. It is about having what you need in order to have the opportunities and choices necessary to participate in society.”
Each year the Joseph Rowntree Foundation uprate their calculations of the Minimum Income Standard to allow for cost, social, and lifestyle changes. Importantly this work is undertaken with ordinary people to ensure that the assumptions used are as accurate as possible.
So what is the MIS in 2017, and how does that compare with the legal minimums imposed on employers? The JRF report tells us:
“In 2017, single people needed to earn at least £17,900 a year before tax to achieve MIS, and couples with two children at least £20,400 each.”
But how does this compare with the legal minimums?
The NLW is currently set at £7.50 per hour, and the highest level of the NMW at £7.05 per hour. Based on a 35 hour working week this equates to £13,650 p.a. and £12,831 p.a. respectively. Both significantly short of the ideal MIS level.
Of course some of this gulf can be bridged by employees using the in-work benefits system provided by the state. Yet these government funded benefits have been frozen in recent years. The JRF report states:
“The National Living Wage has increased minimum pay for working families at a faster rate than MIS budgets have been increasing, but this has been counteracted for families with children by the benefits freeze, which also affects in-work benefits, and leaves them worse off overall.”
The bottom line is that although both legal minimum pay levels and state support help, they are not always sufficient to secure the level needed to genuinely participate in society. So, although the Minimum Income Standard is not a legal requirement, it perhaps should be the aspiration of the vast majority of responsible employers.
For more information on how company sponsored Employee Benefits can help employers support their employees regarding financial issues please speak to your usual Jelf Consultant.
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