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Living or Minimum wages: what do you have to pay?

What’s the difference between a Minimum Wage and a Living Wage? Well, it depends who you ask.

There’s a compulsory Living Wage all employers have to pay (although critics say that just changed the name of the Minimum Wage) and it’s lower than the “real but voluntary” Living Wage: £8.72 per hour compared to £9.50.

From 1st April 2021 employers have to pay a legal minimum of £8.91 an hour for any employees over 23. Previously this highest rate was only for employees aged at least 25. There are lower minimum pay levels for people under 23.

There is also a voluntary “real” Living Wage campaign, which might change name to avoid confusion with the compulsory Living Wage. This has increased from November 2020 and it’s now £9.50 an hour outside London and £10.85 an hour in London. Employers who have signed up to the LW campaign have until 1st April 2021 to raise anyone’s pay to the new minimum levels.

So far, so confusing. Let’s set out what this means in terms of pay and start with the compulsory amounts, which depend on how long your working week is.

The compulsory minimum pay levels from 1st April 2021 are:

Age/ TypePer hourAnnual salary for working 37.5 hours per weekAnnual salary for working 40 hours per week
23 and above£8.91£17,374.50£18,532.80
Under 18£4.62£9,009£9,609.60
Living Wage£9.50£18,525.00£19,760.00

So what does all this mean in reality? From April each year, the minimum legal pay levels increase although the details are not known until close to the time. Retail, catering and hospitality employers are raising concerns about having to increase pay levels every year.

The “real” Living Wage at £9.50 involves paying everyone aged older than 18 salaries of £18,525 – £19,760 depending on the length of your working week.

If you pay everyone at least £9.50 an hour, then you can get recognition for this by signing up to the “real” Living Wage at http://livingwagebrighton.co.uk/. It’s free, it only takes a few minutes and it means you get credit for being a good payer for prospective new recruits.

Statutory pay levels for sickness and parental leave (including maternity) are also increasing. The new rates are £96.35 a week for SSP sickness absence and £151.97 a week for maternity, paternity, adoption, shared parental and parental bereavement pay.

Redundancy payments are also increasing, to a weekly maximum of £544 (the equivalent of an annual salary of £28,288). So if you are planning to make redundancies and the employees have been with you for more than 2 years, your payments might now be a little higher.


By Brian

Updated with the new pay levels from April 2021.


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