What is the living wage? Clearing up the confusion

You’ll have heard of the National Minimum Wage, the National Living Wage and the Real Living Wage - but did you know they’re not all the same thing? 

National Living Wage and Real Living Wage may sound very similar, but are in fact very different.

Let’s break down everything about the subject of the living wage together.

We’ll go over:

Right, let’s get going.

What does “living wage” mean?

The living wage refers to two different things.

Firstly, the living wage can refer to the National Living Wage.

This is very similar to the National Minimum Wage that is set by the Government.

The minimum wage is the lowest hourly rate an employer can pay you. Any lower and they are breaking the law.

Let’s take a closer look at the minimum wage and how to understand it.

Are the living wage and the minimum wage the same?

Name Age group Pay per hour
National Minimum Wage Under 18* £4.55
National Minimum Wage 18-20 £6.45
National Minimum Wage 21-24 £8.20
National Living Wage 25 and over £8.72

*The National Minimum Wage for anyone under 18 only applies to workers who are over school leaving age.

As you can see here, there are different minimum wage rates based on how old you are. You only get paid the National Living Wage if you’re 25 or older.

For 3 of these 4 groups, the official name of the minimum wage is the National Minimum Wage.

The minimum wage for anyone over 25 has a different name. This is the National Living Wage.

It is still, however, a minimum wage rate.

The National Living Wage and the National Minimum Wage are broadly the same thing.

It is important to know the National Living Wage is not calculated based on the cost of living.

Who is entitled to the National Living Wage?

If you’re over 25 and have the right to work in the UK, you are legally entitled to the National Living Wage.

As of 2020, this is £8.72 an hour across all of the UK.

Instead, the National Living Wage is calculated based on a specific target to hit by 2024. 

The target is for the National Living Wage to be 66% of the median wage in the UK. 

This median wage is worked out by looking at all the different wages people earn, and ordering them from highest to lowest. Whichever wage is in the middle is the median wage.

So, for example, if the median wage in the UK were £15 per hour, the target National Living Wage would be £9.90 (66% of £15).

What is the Real Living Wage?

The living wage can also refer to the Real Living Wage (RLW).

RLW is an hourly rate of pay that has been calculated based on the actual cost of living in the UK. 

It is set each year by the Living Wage Foundation. They look at how much food, rent, bills are, as well as other living costs. 

They pull all of this information together, and calculate how much people in the UK need to earn to pay for all of these things.

There are two RLW rates: one for all of the UK, and one for London. There is a separate RLW for London as the cost living is higher than the rest of the UK.

As of 2020, the RLW is £9.30 across the UK, and £10.75 in London.

The RLW applies to all workers over 18. It does not change based on how old you are.

Do employers have to pay the Real Living Wage?

Unlike the National Living Wage, it is not a legal requirement for employers to pay their workers the RLW.

Companies voluntarily sign up to get accredited as Real Living Wage employers by the Living Wage Foundation.

Which companies pay the Real Living Wage?

You can check which companies have been accredited as Real Living Wage employers here.

We also have details of company pay rates on Breakroom.

On Breakroom, 100% of the workers at these companies have shared that they earn £9.30 and over.

Company Average pay rate
Network Rail £19.16
Rolls Royce £18.23
Ford £15.33
Vauxhall Motors £15.08
JCB £14.75
UPS £14.62
Arriva £12.18
National Express £11.30
Eddie Stobart £10.58

We currently are unable to verify that these companies pay all their workers RLW or more.

However, you can use these pay rates as a reference point when comparing similar companies and jobs.

Do you work for one of these companies and don’t get paid RLW? Let us know by comparing your job here.

Want to learn more about employers and the Real Living Wage? We've explored whether Tesco pays living wage here.

Conclusion: The living wage means different things

Let’s recap on what we’ve discussed about the living wage:

Name Who sets it? How is it calculated? Who gets it? Who has to pay it?
National Minimum Wage The Government Different rate per age group 16 to 24 All employers
National Living Wage The Government 66% of the UK’s median wage 25 and over All employers
Real Living Wage The Living Wage Foundation Cost of living 18 and over Voluntary

We think that living wage should refer to the Real Living Wage, as it is based on the real cost of living.

The Real Living Wage fairly pays people for their hard work, and understands that everyone has financial commitments they have to meet.

If you ever see “Living wage” written somewhere, it’s always worth double checking what it is referring to. Is it the National Living Wage or the Real Living Wage?

If you think you’re being paid less than the National Minimum Wage or the National Living Page, you can first double check using this calculator. If you are being underpaid, you can call the ACAS helpline for advice.

Data used in this blog post is from 20 August 2020