Real living wage vs minimum wage UK: What's the difference? How could national wage rises affect you?

Increases in the so-called living wage have been announced
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Tom Herbert6 November 2018

Workers across the UK are set for a boost to their pay packets after it was announced the voluntary living wage will increase.

The rate will rise by 35p an hour to £10.55 in London and by 25p to £9 outside the capital, with the increases largely driven by higher transport costs, private rents and council tax.

The increases are higher than the statutory living wage and above the inflation rate.

Here's all you need to know about the changes.

What is the voluntary living wage? Why is it called the real living wage?

The "real living wage", designed by the charity the Living Wage Foundation, is a voluntary scheme that more than 4,700 UK businesses have signed up to.

It means around 180,000 staff across the UK are being paid a wage that has been based on living costs, with the foundation saying the government's statutory wage is not high enough to meet living costs.

Prior to today's increase, the wage inside London was £10.20 and outside the capital it was £8.75.

The higher rate was calculated to give employees enough to cover daily life and save
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But the rate has increased 35p an hour to £10.55 in London and by 25p to £9 outside the capital because of higher transport costs, private rents and council tax.

Living Wage Foundation director, Tess Lanning, said: "Responsible businesses know that the Government minimum is not enough to live on, and today's new living wage rates will provide a boost for thousands of workers throughout the UK.

"Employers that pay the real living wage enable their workers to live a life of dignity, supporting them to pay off debts and meet the pressures of rising bills.

"We want to see local councils, universities, football clubs, bus companies and the other major public and private sector employers in every city commit to become real living wage employers.

"When they do, thousands of people get a pay rise, but other local employers also follow their lead."

Accountancy firm KPMG found that more than one fifth of jobs pay less than the real living wage.

The new rates are £2.72 higher than the statutory living wage, or National Living Wage, for London workers and £1.17 higher in other parts of the UK.

What is the National Living Wage?

The National Living Wage is a legally binding, statutory rate for workers aged 25 and over and which came into effect on April 1, 2016.

It is currently set at £7.83 an hour, which was decided in April this year, with the wage being reviewed annually.

The statutory rate will increase to £8.21 an hour next April.

What is the National Minimum Wage?

The National Minimum Wage is just like the National Living Wage, except it is only for workers under 25.

For those who are 21 to 24 years of age it will rise from £7.38 to £7.70 an hour in April next year, while 18 to 20-year-olds will see an increase from £5.90 to £6.15.

Workers under 18 years of age will see their wages rise from £4.20 to £4.35 while apprentices will see a jump from £3.70 to £3.90.

Nearly all workers are entitled to the minimum wage, including casual workers, part-time workers and those in temporary roles.

Self-employed people and company directors are not entitled, however.