The National Living Wage & National Minimum Wage explained


Sadiq Kahn announced the new London Living Wage this week, bringing the recommended level of minimum wages in London up to £9.75, with the aim of reaching £10 per hour during his mayoralty.

This is great for workers; but countless businesses have stated they were already struggling with the National Living Wage or is it the National Minimum Wage? Or are they talking about the real Living Wage?

Later this week the House of Commons will debate the “Living Wage week and the implementation of the National Living Wage”, aiming to clarify not only the terminology, but the real world implications of each of these rates.

With the debate reaching far wider than the Commons and making the news nearly every week with difference publications using different terminology, the Retail Gazette has taken a look at the issue in order to clarify what’s what.

READ MORE: Hundreds of thousands to receive pay rise as National Minimum Wage hits record high

The National Minimum Wage

This is a rate of pay per hour, set by the government and reviewed every year, which it is illegal to pay any working person less than.

It came into force in 1999 and is regulated by the Low Pay Commission (LPC), an independent body which advises the government on rates of pay per age group every year.

Workers must be at least school leaving age (16 by the last Friday in June of the school year) to get the National Minimum Wage.

As of October 1, 2016, workers aged 18 and under are entitled to £4 per hour. 18 to 20-year-olds get £5.55, 21 to 24-year-olds are entitled to £6.95 an hour and those over 25 get £7.20 an hour.

READ MORE: National Living Wage plunges 33,000 retailers into “financial distress”

The National Living Wage

This is where many people get confused. Prior to former Chancellor George Osbourne’s announcement of the National Living Wage, the term Living Wage was reserved for a recommended figure, set by the Resolution Foundation, which was voluntary for employers to pay.

However, the government has recently taken to rebranding the National Minimum Wage (NMW), as the National Living Wage (NLW) meaning it actually has nothing at all to do with the Living Wage.

“There is no significant difference between National Minimum Wage and National Living Wage,” Menzies LLP head of retail Roberto Lobue said.

“The government’s National Living Wage was introduced on April 1, 2016 for all working people aged 25 and over, and is set at £7.20 per hour.

“It’s effectively just a premium on top of the National Minimum Wage, which only applies to people over 25 years of age. Both are compulsory for employers.

“Retailers employ 300,000 according to the LPC, or 21.4 per cent of the total.

“When the National Living Wage was first announced, the government said it would reach at least £9 an hour by 2020. That’s a 25 per cent increase on the current £7.20 level. So, over the next four years, retailers are going to see a 25 per cent increase on a lot of their staff costs.”

READ MORE: Retailers divided on National Living Wage<


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