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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.

The Government is introducing a compulsory Living Wage soon, although critics are saying that’s just changing the name of the Minimum Wage – and it will be lower than the current (voluntary) Living Wage.

Currently, employers have to pay a Minimum Wage of £6.70 an hour for any employees over 21. That rises to £7.20 an hour in April 2016, when it will be called the Living Wage. After that, it will increase each year to £9 an hour in 2020.

There are lower Minimum Wage levels for people under 21 and the new Living Wage will only be for employees aged 25 at least. The Minimum Wage levels for people under 25 will continue at the same rates.

There is also a voluntary Living Wage campaign, which might change name to avoid confusion with the new compulsory Living Wage. That’s currently £7.85 an hour outside London and £9.15 an hour in London.

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:

  • Now £6.70 an hour means salaries of around £13,000-£14,000.
  • From April 2016 £7.20 an hour involves £14,000-£15,000 pay levels.
  • In 2020 £9 an hour means salaries of £17,500-£18,700.

So what does all this mean in reality? From April, every employee aged 25 will have to be paid at least £14,040 for a 37.5-hour working week or up to £14,976 for a 40-hour working week.

Retail, catering and hospitality employers are raising concerns about having to increase pay levels – especially because it’s about £1,000 per employee more than October’s Minimum Wage levels and they did not have long to prepare for this pay change.

If you currently pay everyone aged 25 or older at least £15,000 (or less if your working weeks are under 40 hours), then it won’t affect you.

If you pay everyone at least £15,300-£16,400 (for 37.5 to 40-hour working weeks), then you can get recognition for this by signing up to the “real” Living Wage at http://livingwagebrighton.co.uk/. It’s free and only takes a few minutes. You can also find out more about the Living Wage here.

We’ll provide updates about this when the details become clear. You can see more details about what you have to pay people from April 2016 here.


By Brian