Real Living Wage increases

Real Living Wage increases – but be careful not to breach the NMW rules! 

It was announced today by the Living Wage Foundation that the real Living Wage for 2023/24 has been increased to £12 in the UK, and £13.15 in London.

This means that over 460,0000 Living Wage workers will receive a pay increase, with over 14,000 Living Wage employers now committed to paying the new rates.

Understanding the distinction between real Living Wage and National Minimum Wage

The real Living Wage is a voluntary rate of pay (not to be confused with the National Minimum Wage), and this is the eighth year that the Living Wage Commission (LWC) has overseen the calculation of the Living Wage rates for the UK and London.

With the real Living Wage being higher than the National Minimum Wage (NMW), many employers believe that if they choose to pay this higher rate, that they will not breach the NMW rules. Although it is true that employers paying the higher rate will be less likely to breach the NMW rules, they must ensure that they are completing the necessary calculations to correctly establish the employee’s rate of pay for NMW purposes.

Accurate calculations are key to NMW compliance

We have seen many examples where employers that are paying workers in excess of the new real Living Wage rates have breached the NMW rules. This can be due to various deductions not being considered, which can easily take an employee’s pay below the minimum legal rates. Common deductions that can reduce pay include uniforms and tools, PPE, meals, and employer-provided transport.

Avoiding NMW penalties and reputational damage

With penalties being levied on employers who breach the rules of up to 200% of arrears owed to the worker, as well as the risk of being named publicly for any breach of the minimum wage rules, it is important that all employers ensure that they are correctly completing NMW calculations, and do not just rely on the fact that they are paying workers the real Living Wage.

Guidance for NMW compliance assurance

PSTAX offers comprehensive support to ensure your organisation’s compliance with National Minimum Wage regulations. Our team of experienced employment tax specialists can help you:

  • Conduct accurate NMW calculations, considering all relevant deductions
  • Identify potential compliance risks and implement preventive measures
  • Navigate complex NMW rules and stay up to date with regulatory changes
  • Minimise the risk of penalties and safeguard your organisation’s reputation

Don’t leave your organisation vulnerable to costly NMW breaches.

Contact PSTAX today for a consultation

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Mae Kennedy

Written by Mae Kennedy

Mae started her career in tax with BDO in Glasgow after graduating from the University of Strathclyde where she studied for a joint honours degree in Business Law and Finance. Mae has worked in tax since 2005, across both industry and practice and is fully CTA and ATT qualified.

View all by Mae Kennedy