Living wage now bigger influence on pay deals than minimum wage

The rate of the living wage is a bigger influence on pay-setting than the national minimum wage, according to new research on private sector pay forecasts from XpertHR.

Just over one-third of organisations said the living wage will be an influence on the overall level of pay awards in organisations in the next annual wage round, compared with 27.1% who cited the national minimum wage rate as an influence.

XpertHR’s pay forecast survey also showed that more than one-third of organisations believe that the living wage should be considered when setting the national minimum wage rate.

The hourly living wage is currently £7.85 outside London and £9.15 in London. From October 2015, the adult national minimum wage rate will increase from £6.50 to £6.70 per hour.

The research showed that, of the 92.5% organisations that thought the minimum wage rate should be increased from October 2015, more than one-third (36.5%) said it should be raised to the level of the living wage.

This was higher than the 30.8% of respondents that thought the rate should be increased in line with inflation; 15.8% in line with average earnings; and 9.4% at a higher level than inflation and/or earnings.

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More than two-thirds (68.8%) said that the Government should take action to encourage employers to pay workers at least the rate of the living wage, and, although a similar proportion (69.8%) already pay all their employees a higher rate than this, only 22.9% have an explicit commitment to paying at least the living wage to their direct workforce.

Sheila Attwood, XpertHR’s pay and benefits editor, explained why the living wage rate has grown in importance: “Not only have more than one-third of organisations said the minimum wage should rise to the rate of the living wage, organisations deemed the living wage to be a slightly stronger influence than the national minimum wage on the overall level of pay awards in the next annual wage round.”