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What is the difference between the national minimum wage and the living wage?


Since we wrote this blog, there have been updates to the national minimum wage and national living wage rates, and also to the living wage set by the Living Wage Foundation. For a breakdown of 2016/17 rates, and the rates to apply from April 2017 onwards, see our blog Minimum wage and living wage rates from April 2017.

Users of Workbox, the employment team’s online HR site, can also access continually updated information on current rates, along with FAQs on the trickier aspects of calculating the minimum wage, in the Minimum Wage section of the site.

Wednesday’s surprise budget announcement was the introduction of a compulsory living wage for workers aged 25 and above. Coming into force in April 2016, it will initially be set at £7.20 per hour, rising to £9 by 2020.

Recognising that this will mean increased costs for some businesses the government also announced that the national insurance contributions employment allowance will rise from £2000 to £3000 in April 2016; and the rate of corporation tax will be cut from 20% to 19% in 2017 and to 18% in 2020.

Will there still be a national minimum wage?

Yes, national minimum wage rates will continue to be set annually and will apply to those under the age of 25. The new living wage will essentially be a new premium on top of the national minimum wage.

The current national minimum wage rates are:

  • standard adult rate (workers aged 21 and over): £6.50 (£6.70 from October 2015)
  • development rate (workers aged 18-20 inclusive): £5.13 (£5.30 from October 2015)
  • young workers rate (workers aged 16-17 who are not apprentices): £3.79 (£3.87 from October 2015)
  • apprenticeship rate (apprentices under 19 or in the first year of apprenticeship): £2.73 (£3.30 from October 2015)

Isn’t there already a living wage?

Yes, there is already a living wage set annually by the Living Wage Foundation. It is currently £7.85 per hour (and £9.15 in London). This is a voluntary wage, unlike George Osborne’s living wage which will be compulsory.

Please get in touch for more information on either the national minimum wage or the new living wage.

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