Author Mark Fairlie

More than 150,000 workers across the UK are set to benefit from the voluntary living wage rate rising 3.6%, with a 4.6% rise in London. The new figures were announced on Monday 6th November, less than a month after the Office for National Statistics put the inflation rate at a five-year high of 2.8%.

At the time of writing, the minimum wage stands at between £5.55 and £5.60 for 18 to 20-year olds and between £6.95 and £7.05 for 21 to 24-year olds. The government’s National Living Wage, the name for minimum wage for over 25s, is just £7.50.

The Voluntary Living Wage has just risen to £8.75 for all over 18s, and £10.20 for workers in London. Employers choose to pay this rate on a voluntary basis. Currently, there are 3,600 companies in the UK signed up to this scheme, with big names such as Google, Barclays, IKEA and British Gas paving the way for other businesses.

The National Living Wage vs. Voluntary Living Wage

The Government’s National Living Wage is reviewed annually by the Low Pay Commission. It applies only to people aged 25 and the number remains the same across the UK, regardless of varying living costs.

The Voluntary Living Wage is recalculated each year by the Living Wage Foundation to reflect inflation and the real cost of living in the UK. It takes into account the rising prices of rent, travel, food, household bills and even childcare to make sure workers aren’t forced into in-work poverty.

The foundation also sets a separate, higher living wage rate for workers in London to account for the considerably higher living costs. Employers who voluntarily opted to pay the real living wage reported “increased motivation and retention rates for employees.”

An estimated 1.3million workers on National Living Wage will also receive a pay rise next year, according to the Office for Budget Responsibility. However, as employers are legally obligated to make this change, it is expected to also result in a loss of 60,000 jobs and reduce hours worked by as much as 4million a week.

Combatting In-Work Poverty

Voluntary Living Wage

The 2017 Living Wage report by Markit, produced for KPMG, found that 5.5 million people in the UK are still earning below the real living wage. That means the amount they earn does not cover the average costs of living. Although this number was found to have decreased by 100,000 since last year, the number is still worryingly high.

The Mayor of London, Sadiq Khan, has said that in London, “more than 2 million people are struggling to make ends meet and the ethnic pay gap is shockingly and unacceptably large.” The Living Wage is widely considered a step in the right direction for Equal Opportunities employers.

The 2017 report also found that 26% of female employees earn less than the real living wage compared to 16% of males and that 66% of workers aged 18-21 were earning below the threshold.

The minimum £8.75 an hour applies to all workers aged 18 and over, regardless of sex, gender or race. As more employers sign up to the scheme, a larger percentage and wider range of workers will be able to afford the cost of living.

Director of The Living Wage Foundation, Katherine Chapman, stated that “the new living wage rates will bring relief for thousands of UK workers being squeezed by stagnant wages and rising inflation.” More than 150 employers have volunteered to pay the real Living Wage in recent weeks, including the National Gallery, Somerset House, and the Southbank Centre.

Benefit to employers

Last week, Heathrow became the first UK airport to sign up to the scheme. Over 3,200 of its lowest-paid workers, including cleaners and security workers, will be bringing in up to £100 more each week. Paying the real living wage was “the right thing to do as a responsible employer,” according to Heathrow’s chief executive John Holland-Kay.

As the Living Wage Foundation states the scheme is ‘good for business’, mayor Sadiq Khan also said that many accredited employers reported: “increased productivity and reduced staff turnover” since signing up.