Key Facts About The UK's Real Living Wage

Definition and Purpose

• The real Living Wage is a voluntary hourly wage rate independently calculated based on the actual cost of living, ensuring workers can afford basic necessities and maintain a decent standard of living.
• It is the only UK wage rate calculated solely on what is needed to cover living costs, including everyday household expenses such as rent, energy bills, childcare, transport, food, clothing (like a warm winter coat for children), and emergency savings (like a broken boiler).
• Distinct from the government's statutory National Living Wage, which is the legal minimum employers must pay.
• Aims to combat in-work poverty and ensure employment provides sustainable income for workers and their families.
• Promotes ethical business practices and social sustainability.

Current Rates (2025–26)

• UK rate: £13.45 per hour (85p or 6.7% increase from previous year).
• London rate: £14.80 per hour (95p or 6.9% increase from previous year).
• Announced on 22 October 2025.
• A full-time worker earning the real Living Wage earns £2,418 more per year than someone on the government's National Living Wage in the UK.
• In London, a full-time worker on the real Living Wage earns £5,050 more per year than someone on the National Living Wage.
• Compare to government's National Living Wage: £12.21 per hour (for workers aged 21+).

How It’s Calculated

• Calculated annually by economists at the Resolution Foundation.
• Overseen by the Living Wage Commission on behalf of the Living Wage Foundation.
• Uses the Minimum Income Standard (MIS) methodology developed by the Centre for Research in Social Policy at Loughborough University.
• Involves public consultations and focus groups to determine what families need to “get by”.
• Based on comprehensive analysis of household expenses including:
• Housing (rent/mortgage)
• Food (nutritious diets)
• Utilities (energy, water)
• Childcare
• Transport
• Health care
• Education
• Other necessities
• Adjusted for regional differences, with separate higher rate for London to account for elevated living costs (rent, travel, etc.).
• Updated annually to reflect inflation and changes in living costs.
• Focuses solely on living costs, not on economic indicators like median earnings or productivity.

Who Sets and Oversees It

• Resolution Foundation: Performs the annual calculations using economic data and living cost analysis.
• Living Wage Commission: Oversees the calculation process (established 2016); comprises leading employers, independent experts, trade union representatives, and civil society members.
• Living Wage Foundation: Parent organisation that facilitates the process, accredits employers, and promotes the campaign.
• Citizens UK: The Living Wage Foundation is part of Citizens UK.
• All three organisations work collaboratively to ensure the rate is evidence-based, transparent, and responsive to actual living costs.

History and Origins

• Movement began in 2001 in East London through grassroots efforts by Citizens UK.
• Initial focus on London Living Wage due to high costs in the capital (established by 2005).
• 2011: Pivotal year - first UK-wide real Living Wage rate launched and Living Wage Foundation formally established to accredit employers nationally.
• Campaign emerged as response to low wages affecting workers, particularly in high-cost areas.
• Built on philosophical foundations dating back to ancient Greece (Plato, Aristotle) and medieval thought (Thomas Aquinas' “just wage”).
• Modern movement influenced by post-World War II labor campaigns and Catholic Church social teaching.
• £4.2 billion in extra wages has gone to low-paid workers since the campaign began in 2011.

Voluntary vs. Statutory Nature

• Voluntary: Not legally required; employers choose to adopt it as a commitment to fair pay.
• Employers can become accredited with the Living Wage Foundation.
• Contrasts with government's statutory minimum wage rates (National Living Wage and National Minimum Wage) which are legally mandatory.
• Government rates set by Low Pay Commission based on economic factors (inflation, productivity, median earnings) rather than direct living costs.
• Allows employers flexibility in implementation while encouraging prompt adoption after annual rate announcements.
• Non-compliance with statutory wages results in fines and penalties; real Living Wage is voluntary commitment.

Coverage and Application

• Applies to all workers aged 18 and over (no age discrimination).
• Government's National Living Wage only applies to workers aged 21+.
• Covers directly employed staff and regular third-party contractors (cleaners, security guards, etc.).
• “Regular” contractors defined as those working 2+ hours per week for 8 consecutive weeks.
• Does not extend to volunteers, apprentices, or certain self-employed roles.
• Accredited employers encouraged to review zero-hours contracts to avoid exploitation.

Current Impact and Statistics

• Nearly half a million workers (approximately 460,000–500,000) are set for pay boost.
• Over 16,000 accredited Living Wage Employers across the UK as of October 2025.
• Nearly 2,500 new accreditations in the past year alone.
• 1 in 7 employees in the UK now works for an accredited Living Wage Employer.
• However, approximately 4.5 million workers in the UK still earn below the real Living Wage.
• Research shows 42% of low-paid workers have been forced to use foodbanks in the past year.
• For low-paid workers with dependent children, foodbank usage rises to 56%.

Employer Adoption

Major Employers Include

• Half of the FTSE 100 companies.
• Household names: IKEA, Aviva, Everton FC, Nationwide.
• Recent accreditations: Uniqlo (October 2025), University of Salford, Truro City Council.
• Law firms: Linklaters (paying for over a decade).
• Manufacturers: Love Joes (Walsall), Thomas Kneale & Co (Manchester).
• Thousands of small businesses.

Reported Benefits for Employers

• Improved employee retention and reduced turnover (e.g., Love Joes: turnover dropped from 60% to 27%).
• Increased motivation and productivity.
• Better recruitment (e.g., Love Joes: 500 applications for one production role in one weekend).
• Reduced absenteeism.
• Enhanced business reputation.
• Savings on training and recruitment costs.
• Better employee morale and workplace culture.

Related Accreditation Programs

Living Hours

• Over 250 Living Hours Employers (including Aberdeen, Aviva, West Brom Building Society).
• Goes beyond real Living Wage payment.
• Provides guaranteed minimum of 16 hours work per week.
• One month's notice of shift patterns.
• Contract that reflects actual hours worked.
• Offers greater security and stability for workers.

Living Pension

• Nearly 90 Living Pension Employers (including Everton FC, L&G).
• Ensures workers never face poverty in retirement.
• Provides Living Pension savings level using either:
• Cash target: £3,150 per year, OR
• Percentage target: 12% of salary
• Minimum employer contribution: 7% or £1,840 per year.

Key Distinctions from Government Minimum Wage

Cross-Party Political Support

• The real Living Wage movement has gained cross-party political support in the UK.
• Recognised as an effective tool for addressing in-work poverty.
• Supported by trade unions, faith groups, community organisations, and civil society.
• Has grown despite economic challenges and pressures on businesses.