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The real Living Wage rate rise – Key facts

Posted: 27 September 2022, in News

What is happening?

  • Thursday 22 September the UK-wide real Living Wage rate is increasing from £9.90 to £10.90. This is the largest ever increase in the rate, providing a significant pay boost to thousands of workers and their families. As the only wage rate calculated based on living costs, the real Living Wage is more important now than ever.
  • The real Living Wage rate is adjusted annually to reflect changes in the cost of living. This year, in recognition of the sharp increases in living costs, the annual announcement was brought forward to provide clarity to employers and enable them to support their workers with a rate that reflects the increased costs of living.
  • Employers seeking Living Wage accreditation from 22 September will have to pay the new Living Wage rate of £10.90 immediately. As part of their accreditation terms, existing Living Wage Employers (LWEs) have until 15 May 2023 to uprate their staff to the new rate.

#KnowtheDifference – what is the real Living Wage?

  • Unlike the UK Government minimum wage (‘National Living Wage’ for over 23s – £9.50) the real Living Wage is the only wage rate independently calculated based on living costs. It is a voluntary base rate for employers who wish to go beyond the government minimum to demonstrate they value their lowest paid staff. Living Wage employers pay all their directly employed staff aged 18 and over – as well as in scope regular third-party contractors –at or above the real Living Wage.
  • The UK government minimum wage is the legal minimum required by law. It calculated based on a targeted percentage of median earnings and workers have different entitlements by age.

What is the impact?

  • The new Living Wage rate will lead to uplifts in pay that will help thousands of workers in Scotland to meet the current cost of living challenges.

Direct

  • Over 57, 000 workers currently employed by over 2,800 Living Wage employers in Scotland will be receive a welcome pay boost as a result of the new rate.
  • As a result of rate increase, a full-time worker on the real Living Wage will earn £1,950 a year more than their current pay.

Indirect

  • In order to retain pay differentials in organisations, there will be likely be secondary indirect wage rises in the 2,800 Living Wage employers as they adjust wages not only of staff employed at the Living Wage but those at intermediate pay grades above this rate. New research by the Smith Institute modelling the multiplier effects of the real Living Wage will be published by the Living Wage Foundation in November.

Comparison with workers employed on the National Living Wage / National Minimum Wage

  • A full-time worker aged over 23 on the new, real Living Wage would earn £2,730 a year more than a worker earning the current government National Living Wage (NLW).
  • A full-time worker aged 21 or 22 on the new real Living Wage would earn £3,354 a year more than if they were employed at the current government minimum for this age.

How is the real Living Wage calculated?

  • The annual calculation of the real Living Wage rate is overseen by the Living Wage Commission, an independent body of employer, academic and civil society representatives, supported by economists from the Resolution Foundation. The rate is based on the best available evidence of the cost of living across the UK and London, considering a basket of essential goods such as rent, energy, food and clothing costs and the other essentials needed for a basic but decent standard of living.
  • The calculation draws on the annual Minimum Income Standard (MIS) research produced by Loughborough University.
  • A methodology briefing note for calculating this year’s real Living Wage rates will be published by the Resolution Foundation and available here from 22 September. 

Key facts about the Living Wage campaign in Scotland

  • Living Wage Scotland is a partnership between the Poverty Alliance and the Living Wage Foundation, supported by the Scottish Government. Since 2011, the Living Wage campaign has put £365 million into the pockets of workers in increased wages.
  • Scotland’s over 2,800 accredited Living Wage employers span the private, public and third sectors. Over the past two years the Living Wage movement has continued to grow, with the number of Living Wage employers in Scotland increasing by over 70% during this period, and employers in the key low paid industry of hospitality increasing by 170% since the first COVID lockdown in March 2022.
  • Major Living Wage employers in Scotland include SSE, abrdn, Aegon, Innes & Gunn and Morrison Construction. SMEs make up 93% of the total number of employers and 75% of Scotland’s local authorities are accredited.
  • Scotland has the lowest rate of jobs paid below the Living Wage of the nations – 14.4% of jobs are paid below the Living Wage compared to 17.9% in Wales and 17.1% in England Despite this, approximately 333,000 workers in Scotland are still paid less than the real Living Wage.

Common questions and LWS responses

When do employers have to implement the new rate/ when will workers actually feel the benefit of the new rate?

  • Employers seeking Living Wage accreditation from 22 September will have to pay the new Living Wage rate of £10.90 immediately. In these organisations, staff uplifted to the real Living Wage will feel the benefit of the newly announced rate straight away.
  • As part of their accreditation terms, existing Living Wage Employers (LWEs) have 15 May 2023 as a deadline to uprate their staff to the new rate. This implementation window exists to support businesses to make a long term Living Wage commitment, uprating their lowest paid staff year on year, and is particularly helpful to those employers with complex supply chains.
  • LWS is working closely with our employer network to support them to implement the new rate at the earliest opportunity. In Scotland, Begg Shoes, Allied Vehicles and North Ayrshire Council are among the employers committed to pay all their staff at the new real Living Wage or higher immediately from 22 September.
  • Many other employers we have spoken to intend to implement the new rates before Christmas or in January. We expect only a small percentage of LWEs will wait until the May deadline to implement the new rates. 

Is the rate high enough – people are really struggling with the cost crisis? 

  • These are unprecedented times with inflation at a 40-year high putting immense pressure on already squeezed budgets. We know that even with this pay rise it will remain a tough time for families.
  • We hear from workers in the Living Wage employer network about how difficult things are – but we also hear from them about the difference earning the rLW makes. Paying the Living Wage is one of the best thing businesses can do to support their staff during the cost of living crisis.
  • However, the real Living Wage is just one intervention to support the lowest paid with living costs. It’s clear that we may need further government intervention to support people on the lowest incomes if prices continue to rise.

Is the rate too high? Businesses are really struggling with the cost crisis.

  • It’s an incredibly challenging time with rising costs not just affecting workers but businesses too. However, more and more employers are choosing to do right by their employees. The Living Wage is a voluntary scheme, paid by those organisations that can afford to step up and do the right thing by their workers. Over the past three years, we’ve seen record numbers of businesses sign up to pay the real Living Wage, showing an appetite from businesses to do the right thing by their employers.  
  • The Living Wage isn’t just good for workers, but it’s good for business too. Living Wage employers report higher productivity, less absenteeism, higher staff retention and fewer costs on staff recruitment.
  • We know from our employer outreach that businesses are facing increased costs across their operations. It is clear that if costs continue to increase and the economic climate deteriorates, further government intervention may be required to support businesses.

Information provided by the Living Wage Foundation. For any more information contact Rachel Morrison-McCormick | Living Wage Accreditation Officer | Living Wage Scotland

Twitter: @LivingWageScot | @PovertyAlliance