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Finance & Innovation

The Really Good Reason 150,000 British People Just Got a Pay Rise

It’s #LivingWageWeek! But, much like #LoveYourLawyerDay (that apparently happened last Friday), it can be hard to appreciate what you don’t understand. What exactly is the living wage?

Take Action: Call on the Commonwealth to Tackle Gender Inequality, Poverty and Disease

It’s hard to keep track of differing definitions when the rules change with all the regularity of Disney live action remakes. Here’s everything you need to know.

The Minimum Wage

If you’re under 25, this is, by law, the lowest amount an employer can pay you. If you’re aged between 21-25, this will be £7.05 per hour; this drops to £5.60 per hour if you’re between 18-20. 

Initially introduced in 1998 by the Labour Party, this law protects the most vulnerable British workers from low pay. John McDonnell, the Labour Shadow Chancellor, has promised to raise this to over £10 an hour if elected. There is no increase if you live and work in London despite a higher cost of living.

The National Living Wage

This was introduced by George Osborne in 2016 when he was Chancellor for the Exchequer. If you’re over the age of 25, the government says that your National Living Wage is £7.20 an hour. Basically, it’s a compulsory top-up from the minimum wage.

Affecting approximately 1.3 million workers, many regard it as a rebranded minimum wage for people over the age of 25. Employers face maximum penalties of up to £20,000 per worker if they don’t comply. London, again, does not benefit from additional weighting.

The UK Voluntary Living Wage

This is where the pay rise comes in.

The voluntary living wage is higher, non-compulsory, and has nothing to do with the government. Led by the Living Wage Foundation, this is now set nationally at £8.75 an hour to reflect what you need in the UK to live comfortably. Previously it was £8.45 an hour, but it was announced today that there will be a 3.6% increase against a backdrop of rising transport, food and housing costs.

There are over 3,500 businesses, including IKEA and Google, paying all their employees the new voluntary living wage. This means that today 150,000 workers across the UK earn a pay rise. Heathrow Airport have also announced it has signed up to the living wage pledge, allowing over 3,200 low-pay workers a weekly wage increase of £100. 

The London Living Wage has now risen to £10.20 an hour too. The upscale reflects the higher cost of living in London, relative to the rest of the UK.

“London is one of the most dynamic and prosperous economies in the world, but unfortunately this prosperity isn’t shared by all Londoners," said Sadiq Khan, Mayor of London. "In the capital today, more than 2 million people are struggling to make ends meet and the ethnic pay gap is shockingly and unacceptably large."

“I want to make sure that no one who goes to work every day should have to endure the indignity of poverty," he continued. "Paying the London living wage is not only the action of a responsible organisation, but a successful one too. Many of the accredited employers I speak to tell me of the increased productivity and reduced staff turnover that they’ve experienced since signing up.”

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