Unravelling the minimum and living wage puzzle

Unravelling the minimum and living wage puzzle

What is the Living Wage, what is the amount and do you have to pay it?

There is often confusion about the differences between the National Minimum Wage, the National Living Wage and the Living Wage, so the following will clarify everything for you.

The National Minimum wage is the legal minimum wage which must be paid to all UK school leavers up until the age of 25. Rates vary according the an employee’s age.

The most recent update to the National Minimum wage was in October 2016 and hourly rates are:

  21 to 24 18 to 20 Under 18 Apprentice
  £6.95 £5.55 £4.00 £3.40

 

Employees aged 25 and over have to receive the National Living Wage, currently £7.20 per hour.

Apprentices receive a scale according to their time served:

An apprentice aged 22 in the first year of their apprenticeship is entitled to a minimum hourly rate of £3.40

Apprentices are entitled to the minimum wage for their age if they:

  • are aged 19 or over
  • have completed the first year of their apprenticeship

An apprentice aged 22 who has completed the first year of their apprenticeship is entitled to a minimum hourly rate of £6.95

However, the Living Wage is not a legal requirement. It is set by the Living Wage Foundation and is a voluntary figure, calculated independently, based on the cost of living.

The Living Wage Foundation has announced (3rd November 2016) that the voluntary Living Wage rate will increase by 20p to £8.45 per hour, while the rate in London will increase by 35p to £9.75.

The Living Wage Foundation campaigns for employers to pay the voluntary rate and say that one in five people in the UK earn less than the wage they need to get by.

Full time employees earning the Living Wage earn £45 a week more than those on the government minimum, and £95 a week in London, say the Living Wage Foundation.

The number of employers paying the voluntary Living Wage has risen markedly in the last two years. There are now more than 2000 accredited Living Wage employers across the UK, doubling the number from 2014.

The new rate will mean a pay rise for approximately 68,000 staff who are employees including sub-contracted teams working on the premises, of accredited businesses which are committing to paying at least the Living Wage.

 

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