A question we often get asked is what is the difference between the National Minimum Wage, the National Living Wage and the Real Living Wage<

What is the National Minimum Wage (NMW) and National Living Wage (NLW)?

The National Minimum Wage (NMW) and the National Living Wage (NLW) are the minimum rates of hourly pay employers in the UK must pay to their employees.

Since 1 April 2024, the NLW is paid to those aged 21 and over. The age bands are as follows:

• 21+ (NLW)

• 18–20-year-olds (NMW)

• 16–17-year-olds (NMW)

• apprentices under 19, or over 19 and in the first year of the apprenticeship.

Employers who fail to pay the NMW or NLW face the risk of significant fines, inclusion on the Government’s “naming and shaming” list of employers in breach of NMW laws and having to make up the shortfall in wages at a potentially increased rate.

What is the real Living Wage?

In contrast, the Real Living Wage is a voluntary rate that employers pledge to pay.

There are currently over 15,000 accredited employers in the UK, including household names such as Nationwide, IKEA and Google.

This voluntary rate is set by the Living Wage Foundation and is intended to reflect the real cost of living and seeks to improve the pay of those in typically low-paid sectors. When setting its rates, it focuses on the needs of the employee, rather than the employer and tries to reflect the actual cost of living.

There are two rates of the Real Living Wage, one for those living and working within London and another for the rest of the UK.

As a voluntary rate, enforcement of any failure to pay this would be via a tribunal for an unlawful deduction of wages claim or other breach of contract claim.

There can be several benefits to being a real Living Wage accredited employer as a logo from the foundation is provided showing accreditation, which is an easily recognisable way for employers to advertise that they participate in the scheme. The Living Wage Foundation claim that 87% of accredited businesses said their reputation improved and 60% said it increased their employee retention rates. However cost can be a major consideration for employers so careful consideration is needed as to whether an employer can afford and sustain the hight rates, bearing in mind that the real Living Wage does not have the same age bands as the minimum wage.

For us, it's about being a good employer first; compliance will naturally follow, but we use employment law requirements as a tool to facilitate this, so if you want to check out how compliant you are with employment law requirements - download our free employment law checklist