What is the difference between the Living Wage & the National Minimum Wage?

The Living Wage is currently £8.45 in Scotland. It is independently calculated based on what is needed to achieve a low cost, but acceptable standard of living.

This following section of our website is intended as a quick and easy to read summary of the differences between the National Minimum Wage and the Living Wage. For a fuller discussion of what “the Living Wage” means and a response to the announcement in the UK Government’s 2015 Budget regarding a “National Living Wage” please read our blog here.

We have broken down the main differences below, and you can also download our Factsheet here.
 

  The Minimum Wage     The Living Wage  
The minimum pay per hour that workers are entitled to by law A voluntary rate that employers can choose to commit to paying.
A range of different rates apply depending on the age of the worker. The rate is the same for all workers over the age of 18.
Set by the UK Government Set by the Living Wage Foundation.
Based on an estimation of how much the market (as a whole) can bear. Based on the cost of living and the “Minimum Income Standards” required for a basic, but adequate standard of living.
A statutory obligation which employers must meet or face legal challenge. A movement and a demonstration of best practice and fair work.

 

Minimum Wage Rates:

Year 21 and over 18 to 20 Under 18 Apprentice
2015 (Rate from 1 October) £6.70 £5.30 £3.87 £3.30

 

From April 2016, a new rate will apply to workers aged 25 and over. The new rate has been branded as “the National Living Wage”.

It will start next year at £7.20 per hour. Despite the name, this new rate is essentially a new Minimum Wage for the over 25s.

This means that from April 2016, the National Minimum Wage rates will be:

Year 25 and over 21 to 24 18 to 20 Under 18 Apprentice
April 2016 £7.20 £6.70 £5.30 £3.87 £3.30

 

The intention is that the National Minimum Wage for over 25s will increase each year with the aim of reaching 60% of the median wage across the country by 2020. This means it may reach as high as £9, however there is no guarantee this will be the case as the rate will still be set by the Low Pay Commission and they must still consider what the market as a whole can bear. In other words, it could be much less than £9 by 2020.

 

Living Wage Rates:

Year London Rest of UK
2015 (current rate) £9.40 £8.25

 

The Living Wage is reviewed each year and the new rate is announced each year in November during Living Wage Week.