Rhys Moore: Will the national living wage have unintended consequences for employers?


The Summer Budget has marked a milestone in the living wage movement. The announcement of a minimum wage premium for over-25s is a huge step in the right direction to tackle the low wage culture in the UK.

Currently, 1,600 businesses are accredited living wage employers that commit to pay all employees, and sub-contracted staff, the living wage. It is a voluntary rate, calculated independently and based on the cost of living in the UK. It is currently set at £7.85 an hour, and in London £9.15. The minimum wage premium for over-25s will see an increase for many workers currently earning just £6.50 to £7.20 an hour in April 2016, with an aim to raise this rate to £9.00 an hour by 2020.

Living wage accredited employers are showing leadership: accreditation is a sign of responsible business. They pay the living wage to those aged 18 and over, and in London will pay the higher London living wage, to reflect the increased costs associated to living in the capital. We are concerned that the Budget announcement may cause confusion to businesses, workers and customers. There are now five various national minimum wage rates for businesses to manage, including one that the Chancellor referred to as the national living wage, which many organisations already know to be the voluntary rate. We hope that these various rates, and the different times at which they will come into effect during the year, will not cause an additional enforcement challenge.

An unintended, but helpful, consequence of the Chancellor’s announcement has been an increase in enquiries to the Living Wage Foundation. Organisations that are now investigating how they can make the move to the new statutory rate are taking the opportunity to see how they can go the extra mile and implement the voluntary living wage across their business. Many organisations see the business benefits of a living wage, including increased productivity, improved retention rates and reduced absenteeism, as well as recognising that paying people a wage they can live on is the right thing to do.

Sign up to our newsletters

Receive news and guidance on a range of HR issues direct to your inbox

This field is for validation purposes and should be left unchanged.

We call on businesses that can, to show leadership and pay above the statutory minimum.

Rhys Moore is director at the Living Wage Foundation