National Living Wage
The Benefits of Becoming a Real Living Wage Employer
The government has recently risen the National Living Wage as a response to the impact of the cost-of-living crisis. There are several benefits of becoming a real Living Wage employer, especially from a retention perspective. We look at the new rates, as well as comparing the new National Living Wage with the recommended Living Wage Foundation rates.
What is the new National Living Wage?
At the end of November, the Low Pay Commission’s recommendations on minimum wage rates were accepted by the government. The National Living Wage will increase to two-thirds of average earnings. A full-time worker on the National Living Wage, for example, should earn an extra £1,000 over the next year. Along with wage increases, the age where you can be paid the National Living Wage has changed from 23 years to 21 years.
From April 2024, these rates will increase as follows:
What are the recommended Living Wage Foundation rates?
When compared to the Living Wage Foundation rates, however, the new National Living Wage still falls short. The ‘real Living Wage’ is based on the actual cost of living and is currently paid voluntarily by around 14,000 businesses in the UK. It’s estimated that over 460,000 employees have benefitted from a pay rise due to the foundation’s campaigning.
According to the Living Wage Foundation, the real Living Wage should be set as follows:
Across the UK - £12
London - £13.15
What you choose to pay your employees is set in law, but you could also consider paying the real Living Wage above. Not only does this show that you understand the impact of the cost-of-living crisis, but it also demonstrates that you value your employees. When people are paid enough to make ends meet, they are generally more motivated in the workplace.
Another benefit of paying the real Living Wage is improved brand reputation. Your company will become respected for paying above national rates, helping you to retain and attract talented employees, as well as boosting productivity. Many companies have stated that paying this rate has helped them to secure new contracts and funding sources.
The Living Wage Foundation carried out a survey to find out how businesses were faring by paying the real Living Wage. The results were interesting and show there are clear advantages for employers. 87% of businesses paying this higher rate reported that it has improved their brand reputation. Two-thirds of businesses reported that it had both differentiated them from their competitors and it had improved employee recruitment.
Many employers fear that increasing employee pay will have an impact on the company’s bottom line. But the long-term benefits of becoming a real Living Wage employer are worth considering, especially when it comes to boosting productivity. Greater productivity levels could offset the higher wage rates by leading to an increase in profit.
Are you reviewing your resources?
It’s thought that over 2 million low-paid workers will benefit from the new National Living Wage. But as an employer, are you concerned about how the new increased rates will affect your resourcing budgets? Would you like to pay the real Living Wage, but you’re worried about the financial impact? Another factor for employers to consider is the reduction in employee Class 1 National Insurance Contributions (NICs) due to come in January 2024.
If you are currently reviewing your resource budget and need advice on staff structures, please speak to us. At Invictus HR, we support a wide variety of businesses on a retained basis, which means we’re on hand to help you whenever you need us.
Our HR support ensures you are always kept up to date with the latest employment legislation and the potential impact from any changes. Whether you need regular support or help with an ad hoc HR project, talk to us.
For HR advice on resourcing strategies, or to discuss concerns regarding recent changes to the National Living Wage, please get in touch.
Sources:
https://www.gov.uk/government/news/chancellor-announces-major-increase-to-national-living-wage
https://www.livingwage.org.uk/what-real-living-wage
https://www.livingwage.org.uk/calculating-real-living-wage-2023