What is the Real Living Wage 2022? How does UK rate compare to National Minimum Wage and National Living Wage

The UK is in the middle of its worst cost of living crisis for decades, as inflation has risen to 40-year highs. High energy bills, record fuel costs and rapidly increasing food prices have all dented people’s spending power.

New Prime Minister Liz Truss has said she will aim to tackle the crisis through tax cuts and intervening in the energy market. She has also sought to stave off a forecasted recession by supporting businesses with their energy costs.

Despite these interventions, inflation is expected to remain at a high level for some time yet. The situation has led the Real Living Wage scheme to announce an increase in salaries for companies that have signed up to it.

But what is this scheme - and how does it compare to the National Minimum Wage and National Living Wage? Here’s what you need to know.

What is the Real Living Wage?

The Real Living Wage is a voluntary scheme that aims to ensure salaries adequately meet the needs of workers. It is run by charity the Living Wage Foundation, which independently calculates the cost of an everyday basket of goods workers are likely to face every day and sets wages accordingly.

11,000 UK firms with close to 400,000 employees are signed up to the scheme, including several major businesses. Big-name companies paying the Real Living Wage include: Nationwide, Google, LUSH, Everton FC and Chelsea FC.

Businesses that employ workers in London are set a slightly higher salary by the Living Wage Foundation because the cost of living in the UK capital tends to be higher than in the rest of the country.

How is Real Living Wage different from Minimum Wage?

The Real Living Wage is different from the National Living Wage and the National Minimum Wage. For starters, it is not a legal requirement to pay it as the scheme is voluntary.

The National Minimum Wage is a statutory requirement for businesses employing people between the ages of 21 and 23. The National Living Wage legally applies to all workers aged 23 and older.

The Real Living Wage applies to all workers over the age of 18.

People on the National Minimum Wage earn at least £9.18 an hour. This figure is based on a negotiated settlement between the government, businesses and trade unions and there is no London weighting.

For those earning the National Living Wage, they get a flat rate of £9.50 an hour regardless of geographical location. This legal minimum is set by taking a percentage of median earnings, and will hit 66% of this pay average by 2024.

Those who are employed by a Real Living Wage company take home £11.05 an hour in London and £9.90 across the rest of the UK. But on 22 September, these rates were increased.

How much is Real Living Wage rising by?

The Living Wage Foundation has increased pay in line with the July 2022 Consumer Prices Index (CPI). This measure of inflation showed average prices in the UK economy had risen 10.1% year-on-year - the highest rate since February 1982.

It means London workers at companies signed up to the scheme will earn £11.95 an hour, with everyone else getting £10.90.

The Living Wage Foundation says the employers signed up to it should implement these pay rises immediately. But it gives firms a grace period to bring in the new wage rate, with the latest date the increase should have been implemented by sitting on 14 May 2023.

It means London workers on the Real Living Wage will earn £4,777.50 a year more than those on the National Living Wage. A person working full-time on the Real Living Wage elsewhere in the country will get an extra £2,730 per year more than someone earning the National Living Wage.

“With living costs rising so rapidly, millions are facing an awful ‘heat or eat’ choice this winter. That’s why a real Living Wage is more vital than ever,” said Living Wage Foundation director Katherine Chapman.

“Today’s new rates will provide hundreds of thousands of workers and their families with greater security and stability during these incredibly difficult times. We are facing unprecedented challenges with the cost-of-living crisis, but businesses continue to step up and support workers by signing up to the Living Wage in record numbers.

“We know that the Living Wage is good for employers as well as workers, that’s why the Real Living Wage must continue to be at the heart of solutions to tackle the cost-of-living crisis.”