What is the difference between the Real Living Wage and the National Living Wage?

NMW and NLW increase

In November 2018, the Real Living Wage rose to £9.00 per hour across the UK and £10.55 per hour within London.

We understand that keeping up with ever-changing legislation can be a real challenge, and you might wonder what the Real Living Wage is, whether it’s statutory and if it applies to all your employees?

Before you start panicking, here’s everything you need to know.

The Real Living Wage

Designed by the charity the Living Wage Foundation, the Real Living Wage is voluntary and is calculated by estimating the rate that is needed to meet the costs of living, based on a basket of household goods and services.

The wage rate applies to all employees aged 18 and over and includes a separate London weighting, to reflect the increased cost of living in the capital.

In November 2018, the per hourly rate increased by 35p in London to £10.55 and 25p elsewhere in the UK to £9.00, largely attributed to increased transport costs, rising private rents and council tax.

More than 4,700 employers across the UK adopt a Real Living Wage including IKEA, Aviva, Burberry, KPMG, Nationwide and Nestlé, to name a few.

Reasons why employers choose to pay a Real Living Wage include:

  • Increased motivation and retention rates for employees;
  • Boosting business reputation;
  • Differentiation from competitors;
  • Improved relationships between management and employees.

However, it should not be confused with the statutory National Living Wage explained below.

The National Living Wage

The National Living Wage is a statutory requirement and is the National Minimum Wage for employees aged 25 and over.

Unlike the Real Living Wage, there is no additional London weighting.

Reviewed annually, it currently stands at £7.83 per hour and is due to increase to £8.21 per hour from April 2019.

The National Minimum Wage

The National Minimum Wage is also a statutory requirement and applies to almost all workers aged 21 and over but under 25.

The National Minimum Wage and the National Living Wage both apply to employees and workers, but not the self-employed.

Current statutory minimum wage requirements are summarised in the table below (note that apprentices are entitled to the apprentice rate if they are aged under 19, or aged 19 and over but in the first year of their apprenticeship).

YearApril 2018 (current rate)April 2019
25 and over£7.83£8.21
21 to 24£7.38£7.70
18 to 20£5.90£6.15
Under 18£4.20£4.35

The risks

In the same way that paying the Real Living Wage can boost your business’ reputation, there have been a growing number of instances of ‘naming and shaming’ employers who do not pay the correct National Living Wage/National Minimum Wage, not to mention the fact that you could be fined up to 200% of the underpayment.

You should regularly review pay levels to make sure employees and workers are being paid correctly.

If you discover any incorrect payments, make sure these are resolved quickly before they escalate into larger issues.

Citation can help

With over 20 years of experience, we understand how stressful, confusing and time-consuming it can be to keep up with legislative changes.

As a Citation client, you will have 24/7 access to our team of friendly experts through our advice line to ask any questions you might have, and our tools and resources have been designed to help make your life easier.

Want to find out more? Contact our team on 0345 844 1111 or hello@citation.co.uk.

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