Employment

Record increase in real living wage will see 400,000 workers get pay rise

But some have said the £1 an hour raise may not be enough for some employees in the current cost of living crisis

Cleaner sweeps the floor inside an office building

To receive accreditation as a living wage employer, all staff including contractors such as cleaners or catering staff, must be paid the new rates. Image: Verne Ho / Unsplash

Thousands of low-paid workers across the UK are getting an inflation-matching pay rise as the Living Wage Foundation (LWF) announces its new rates.

An extra £1 an hour will be added to the pay packets of workers who earn the real living wage, or an extra 90p for those in London. The rise is mandatory for the 11,000 employers who are signed up to the scheme.

The real living wage is different to the national living wage and national minimum wage, both of which are set by the government. The LWF sets the rate of pay based on up-to-date living costs, taking into account the cost of bills, the weekly shop and other measures, and making sure workers are paid enough to live on. 

The 10.1 pay rise is the biggest ever jump calculated by the foundation in its 11-year history, and takes into account inflation hitting 10.1 per cent in July, then 9.9 in August. 

Real living wage employers include Ikea, Nationwide, food delivery app Getir, Aviva, Nestlé, Everton Football Club and at least 60 councils across the UK.

The rate, which will now be £10.90 an hour across the UK and £11.95 an hour in London, was brought forward two months to account for the cost of living crisis.

Gavin Ryan has worked at Anchor Removals for 10 years, and said earning the living wage helped him move out of his mum’s house and into a home with his partner.

He described earning the rate as a “life saver” during the pandemic. “My partner Nic lost her job as a travel consultant and went to work for a supermarket,” he said. “Her hours and pay were not great, but because I was earning the living wage with guaranteed hours, I knew I could support her.”

For his boss, Chris Smallwood, it’s about acknowledging “the importance of a wage that values people”.

“I wanted to break this mentality that is endemic in my industry that it has to be tough. When I get up in the morning, I can look myself in the mirror knowing all the good things around me are not at the expense of other people, because I’ve paid them well”, he added.

The new rates are now worth almost £3,000 more a year than the government’s national minimum wage, and almost £5,000 more in London. The hourly minimum wage for people aged 23 or above, which the government rebranded as the “living wage”, is £9.50. People aged 21 and 22 must receive at least £9.18 an hour, 18- to 20-year-olds at least £6.83, and 16- and 17-year-olds £4.81.

Charles Cotton, a senior adviser at the CIPD, the professional body for HR and people development, said the new rates “may not be enough to improve financial conditions for some of the lowest paid employees” during the cost of living crisis.

He said: “Employers should also consider other ways they can support employees’ financial wellbeing. As well as offering enough hours for staff to have a decent standard of living, organisations should review aspects of employment such as flexible working, career progression opportunities, and financial wellbeing benefits, for example occupational sick pay or hardship loans.”

He also questioned whether businesses would be able to afford to pay the new rates, as they too are suffering from significant cost increases including for energy.

“The most sustainable way for employers to pay more is through improved productivity”, he advised, adding: “This doesn’t mean forcing staff to work harder, but smarter. Employers should review how jobs, tasks and workplaces are designed to see where improvements can be made.”

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Around 7 per cent of all UK workers were paid at or below the minimum wage in April 2020, the Low Pay Commission has estimated. 

“Today’s new rates will provide hundreds of thousands of workers and their families with greater security and stability during these incredibly difficult times,” said Katherine Chapman, LWF director.

“We are facing unprecedented challenges with the cost-of-living crisis, but businesses continue to step up and support workers by signing up to the Living Wage in record numbers. We know that the Living Wage is good for employers as well as workers, that’s why the real living wage must continue to be at the heart of solutions to tackle the cost-of-living crisis.”

Over half the people earning below the real living wage had to use a food bank in the past year according to the foundation’s research. 

To receive accreditation from the LWF, employers must make sure all staff are paid the rate as a minimum, including contractors such as cleaning or catering staff.

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