What's the difference between Minimum Wage and Living Wage?

Updated
What's the difference between the Minimum Wage and Living Wage?
What's the difference between the Minimum Wage and Living Wage?


There are now three types of "wage" in the UK: Minimum Wage, Living Wage and the National Living Wage.

With all this terminology floating around, it's no wonder people are getting confused about how much they will get paid.

So we've put together a simple guide to what these terms mean, and how the different rates of pay compare.

National Living Wage


George Osborne.
Chancellor George Osborne announced the National Living Wage in the summer Budget (Richard Stonehouse/PA)

This was announced by the Chancellor in the summer Budget. From April 2016, workers aged 25 and over must be paid at least £7.20 an hour.
%VIRTUAL-ArticleSidebar-pay%
This compulsory threshold will gradually increase to £9 an hour by 2020, and will apply to both part-time and full-time workers.

Living Wage


The Living Wage is set by the Living Wage Foundation, and is calculated next to the cost of living annually.

It is not compulsory for employers to pay it, so is often referred to as the voluntary Living Wage.

Today it was increased by 40p to £8.25 an hour outside of London and £9.40 an hour in the capital – notably more than the Government's impending targets.

National Minimum Wage


Money and payslip.
National Minimum Wage will still apply for some workers (Nick Ansell/PA)

This is currently set at £6.70 an hour for those over 21. It will continue to apply to all workers aged 21 to 24, who will not benefit from the increases to the National Living Wage next year.

For workers aged 18 to 20, the National Minimum Wage is set at £5.30 an hour, while for under-18s it is £3.87 and for apprentices £3.30.

And here's how the rates compare:


Chart showing difference between minimum and living wage.
(Snappa/PA)




Budget 2015: Osborne Unveils 'National Living Wage'
Budget 2015: Osborne Unveils 'National Living Wage'

Advertisement