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They think it will help them to attract the best staff and give their existing staff a boost, helping them to grow and develop their business. Can you help me to explain what the real living wage is, and the implications for my client should they go ahead with this? Currently, they pay minimum wage.
A. What is the real Living Wage?
The real Living Wage is a voluntary initiative that employers such as your client can choose to join, which seeks to improve the pay of those in typically low-paid sectors. When setting its rates, it focuses on the needs of the employee, rather than the employer, and tries to reflect the actual cost of living.
Unlike the National Minimum Wage, there are separate rates for London and the rest of the UK. There is no legal obligation to pay the real Living Wage; employers who choose to do so can receive accreditation from the Living Wage Foundation.
There are currently over 15,000 accredited employers in the UK including household names such as Nationwide, IKEA and Google.
The current rates
The new rates were announced on 23 October 2024, and employers wishing to maintain or gain an accreditation have until 1 May 2025 to implement them. The rates apply to all workers aged 18 and over and are:
• £12.60 per hour for the UK
• £13.85 per hour in London
Benefits of paying the real Living Wage
There are several benefits to being a real Living Wage accredited employer. Firstly, your client will be able to use a logo from the foundation to show off their accreditation, which is an easily recognisable way for them to advertise that they participate in the scheme. It’s not just that though; the Living Wage foundation claim that 87% of accredited businesses said their reputation improved and 60% said it increased their employee retention rates.
What’s the downside?
Clearly, cost is a major consideration for your client. The current rates of minimum wage are significantly less, at £12.21 (National Living wage, for those aged 21 and over), £10 (National Minimum wage for those aged 18 – 20) and £7.55 (for apprentices and those aged 16 – 17). Your client needs to carefully assess whether this is a rate they can afford and sustain, bearing in mind that the real Living Wage does not have the same age bands as minimum wage.
If they cannot continue to pay the real Living Wage long-term, which so far has increased each year, then they not only risk losing their accreditation and damage to their reputation, but they will also need to undergo a process to change employee wages which can be legally risky and damaging to employee relations.
Ultimately, as a voluntary rate, it is down to your client to weigh up the pros and cons of what becoming a real Living Wage accredited employer will mean for their business.
