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Living wage vs. minimum wage: what’s the difference?

Living wage vs. minimum wage: what’s the difference?
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It’s easy to confuse the National Minimum Wage and the National Living Wage. However, they’re not quite the same – here are some key differences worth knowing.

What’s the difference then?

Both the National Minimum Wage and the National Living Wage dictate the minimum amount of money you should get for one hour of work. However, the difference is that what you get depends on your age.

To earn the National Minimum Wage (NMW) you’ll need to be least 16. When you turn 25, you’ll then become eligible for the National Living Wage (NLW) which is higher than the NMW.

How much are the NMW and NLW?

The UK government sets both the NMW and the NLW based on recommendations from the Low Pay Commission. The amounts are scaled, so you’ll be paid a different rate depending on your age and whether or not you’re an apprentice. Rates change every April. A full set of current rates can be seen below:

National Minimum Wage:

  • £4.55 if you’re under 18
  • £6.45 is you’re between 18-20
  • £8.20 if you’re between 21-24

National Living Wage:

  • £8.72 for anyone aged 25 and over

Apprenticeships:

What you’ll get will depend on your age and the stage you’re at in your apprenticeship.

So, if you’re under 19 and in your first year of apprenticeship, you’ll get an apprentice rate of £4.15 per hour. If you’re 19 or over and have completed the first year of your apprenticeship, you’ll get the NMW rate applicable to your age. For example, if you’re 19, you’ll get £6.45 per hour and if you’re 23, you’ll get £8.20 per hour.

Who’s entitled to the NMW and NLW?

Almost everyone aged 16 or over is entitled to the national minimum or national living wage – even casual and part-time workers. There are some exceptions, for instance people that run their own businesses, and volunteers. For a complete list of exemptions, head to GOV.UK/national minimum wage.

Do the NMW and NLW equal a living wage?

It’s hard to measure whether or not the minimums set by the government are enough to live on. Ultimately, a lot will depend on your own circumstances. But figures released by the Office for National Statistics (ONS) in 2018 suggest the amounts might not be enough.

At the time of the ONS release, the NMW and the NLW were slightly lower. Nevertheless, the data revealed a shortfall of just over £200 between the weekly income of workers on the NLW and the average amount spent by households.

In response to this shortfall, is something called the Living Wage – not to be confused with the National Living Wage.

Unlike the NMW and the NLW which must be observed, the Living Wage is a theoretical amount calculated by an organisation called the Living Wage Foundation. The Living Wage is actually based on the cost of living while the NMW and the NLW are based on bringing low paid workers up to 66% of the UK average.

The Living Wage has two suggested amounts. These are currently: £10.75 if you live in London and £9.30 if you live elsewhere in the UK. Firms don’t have to pay the Living Wage but around 6,000 businesses across the UK choose to, saying it boosts morale and staff loyalty.

Check you’re being paid enough

Unless you fall into one of the groups in the exemptions list, your employer must (by law) pay you either the NMW or the NLW. If they’ve made a mistake then they’ll need to pay back any outstanding amounts.

If you think you’re being paid less than you’re entitled to, speak to your employer in the first instance. Your employer might simply have forgotten to increase your wage after a birthday puts you into the next pay bracket.

If you hit a brick wall with your employer, a good next step is to contact Acas, the UK’s employment arbitration service. Their advice is free and impartial and is available for both employees and employers. Contact details can be found on the Acas website.

 

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