Living wage rises to £8.45 per hour


Almost 3,000 businesses volunteer to offer a pay increase, but experts say new rates will challenge employers in low-paying sectors

The UK voluntary living wage rate, as calculated by the Living Wage Foundation, has increased by 20p to £8.45 per hour, making it 17 per cent higher than the government’s national living wage (NLW) of £7.20 for over 25 year olds.

The voluntary living wage for workers living in London has risen by 35p to £9.75 per hour.

A full-time worker aged 25 or over on the voluntary living wage in London could earn £95 a week more than if they were paid the government’s NLW; over-25s elsewhere in the UK would be £45 a week better off.

Katherine Chapman, director of the Living Wage Foundation, said: “Today’s new living wage rates bring a welcome pay rise to thousands of workers across the UK.

“One in five people earn less than the wage they need to get by. That’s why it’s more important than ever for leading employers to join the growing movement of businesses and organisations that are going further than the government minimum and making sure their employees earn enough to cover the cost of living.”

Almost 3,000 employers – including Ikea, Everton Football Club and Curzon Cinemas – have already pledged to increase employee pay to match the new voluntary living wage rate. Pernille Hagild, Ikea country HR manager for the UK, said the furniture retailer had experienced a slight reduction in staff turnover and employee absence since it started to pay the living wage. The quantity and quality of job applicants had also increased, she added.

But the new rates will pose a real challenge to employers in low-paying sectors such as retail, caring and hospitality, said Dr Angela Wright, senior lecturer in human resource management at Westminster Business School. “Recent research commissioned by the Living Wage Foundation shows that most organisations paying the voluntary living wage had low numbers of people earning at less than these rates. For companies and sectors that target the legal minimum pay for vast swathes of their workforces, there are some very real challenges they will need to overcome because of these rising rates,” she said.

“Several strands of research indicate that the business decision to voluntarily pay the higher rates is based on managerial judgements about the relative costs and benefits of doing so. When the benefits of the higher pay rates – principally, positive reputational value and higher productivity – do not outweigh the extra costs, then organisations may not sign up to the voluntary living wage.

“While companies may be able to restructure their reward offering to reduce costs – for example, by consolidating overtime pay or other additional payments into the higher basic pay rates – much of the debate in boardrooms is likely to focus on whether the positive effects on their reputations is worth the much higher extra costs they will incur.”

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