Created by: Katherine Locke | 5 August 2019

What Does The New National Living Wage Mean For You

What is the difference between the National Minimum Wage (NMW) and the National Living Wage (NLW)?  The main difference is that the NMW is paid to under 25’s, whereas the National Living Wage is the agreed minimum rate paid for over 25’s.  This rate is set by the government and employers are required, by law, to pay these set rates as a minimum.  You can, of course, be paid more than the NLW, but not less.

In April 2019 the National Living Wage is due to increase to £8.21 for over 25-year olds.  This is a 38p increase from the current rate of £7.83.   Apprentices and workers under 25 have a different set of rules - you can find more information.

So, what will this increase mean to you?  If you are one of the 2.4 million workers in Britain currently on MLW, the increase may seem very small.  However, over a year, it will mean an average pay increase of £690.  For some families, that have their pay topped up by benefits, the increase might be slightly more.    

The government says that this increase exceeds inflation and, because of a reasonably strong economy, hopes to increase the NLW to £8.62 by 2020.  All these predictions could, of course, be affected by Brexit and the future of the MLW is uncertain.

There is another organisation – The Living Wage Foundation – which has a different idea of the minimum amount of pay required for a decent standard of living.  The Living Wage Foundation rates of pay are higher because they use a different set of criteria to calculate what families actually need to live on.   Their evaluation takes into account everyday living costs, including the cost of an average basket of shopping, rather than the government’s calculation, which has a target of reaching 60% of median earnings by 2020, rather than actual living costs.

The Living Wage Foundation recommends that the rate of pay within London should be £10.55 per hour and £9.00 per hour outside London.  The Foundation calculate these rates in November each year and then campaign for employers to start paying the new rate by the following May.  Although these rates are not law, they are only guidelines, many employers take them up voluntarily.

The Living Wage Foundation insists that a fair day’s pay for a fair day’s work is the way to a better and brighter future for workers in the UK.  Currently, 4,919 employers voluntarily pay these guideline wages, including large organisations like Ikea, Nationwide and Aviva Insurance.   So, why would employers pay more than the government stipulation?

They say it is good for business.  86% say it has improved the reputation of the business and 75% say it has improved retention rates and increased employee motivation.  Ikea believes that happy staff with a good team provide excellent customer service which leads to more sales.  Simple, really.

If you are worried that your pay is below NLW, the first course of action is to talk to your employer.  If you would like your employer to think about the benefits of the Living Wage,   ask them to check it out here.  Good Luck!

Money

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