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How much we earn from our work is always important to us but in the last year it’s become even more crucial - and controversial. The cost of living crisis has seen mortgages and rents rising, energy bills skyrocketing, and prices of everyday items in supermarkets doubling. But have wages increased at the same rate?

Paying more for essentials, coupled with heightened inflation and stagnant wages, means it’s harder for many to cope which is why the UK has seen a wave of strikes from public sector workers like teachers, nurses and doctors. It’s also why the National Living Wage is so important.

But what is a National Living Wage? In this guide, we’ll cover everything you need to know as an employer about the living wage in the UK, including:

  • What is a National Living Wage?
  • What is the National Living Wage?

So if you want to know what the National Living Wage is in 2023, read on.

What is a National Living Wage?

If you haven’t heard of the National Living Wage, you may be familiar with the National Minimum Wage instead. Let’s explore the difference.

While both are important, they aren’t the same thing. The key difference is that the National Minimum Wage is the legal minimum that employers must pay their workers whereas the concept of the living wage is what they actually need to earn to meet their basic needs and maintain a decent standard of living.

To complicate things slightly, the National Living Wage, like the National Minimum Wage, is set by the government and applies to workers over the age of 23. Those under 23 (and of legal working age) are covered by the National Minimum Wage.

The National Living Wage was introduced in April 2017 - initially only for those over 25, dropping to 23 in 2021. This was a result of criticism that the National Minimum Wage wasn’t sufficient for people to actually live on so the government introduced changes to the National Minimum Wage. Despite its name, it isn’t actually based on living costs, but is instead based on a target to reach 66% of median earnings by 2024.

Real living wage definition

And then there’s the Real Living Wage. This is different from the National Living Wage because, as the name suggests, it’s based on what people REALLY need to earn to live. It isn’t set by the government so there’s no legal burden on businesses to pay it, but more than 12,000 of them voluntarily do so. The Living Wage Foundation claims that more than 400,000 employees have received a pay rise because of being switched to the Real Living Wage.

Rates for the Real Living Wage are calculated annually by the Resolution Foundation, overseen by the Living Wage Commission and one of the main differences between it and the governmental wage minimums is that it factors in regional differences. This results in there being two different Real Living Wages, one for London and one for the rest of the UK.

This is because the cost of living is higher generally in London, so people who live and work there need to earn more to achieve the same standard of living as people living elsewhere. Neither the National Minimum Wage nor the National Living Wage take this into account.

What is the National Living Wage now?

So, how much is the National Living Wage? For everyone across the UK over the age of 23, it is £10.42 an hour at the time of publishing. For those under 23, the National Minimum Wage starts off at £5.28 for under-18s and apprentices, rising to £7.49 for those 18-20 and £10.18 for those 21-22.

The National Living Wage before April 2023 was £9.50, having risen from £8.91 in April 2022. When it was first introduced for over-25s in April 2016 it was £7.20, so clearly, it has continued to rise throughout its existence and this year has seen the largest rate to date. However, it remains lower than the Real Living Wage.

The current Real Living Wage is set at £10.90 across the UK and at £11.95 in London. The Living Wage Foundation says that this difference means that employees on the National Living Wage would need an extra £936 a year to earn the Real Living Wage, a difference of 14 weeks of food or 11 weeks of housing and energy costs.

In London the difference is even more stark, with people paid the National Living Wage earning £2,983.50 a year less than those on the Real Living Wage, the equivalent of 38 weeks of food shopping or 21 weeks of housing and energy costs.

The Real Living Wage is voluntary, the National Living and Minimum Wages are not

However, the Real Living Wage remains voluntary, so if you are looking to find out your legal obligations, the most important thing to remember is that you need to be paying the National Living Wage to anyone over 23 years old and the National Minimum Wage to those under 23.

It’s illegal to pay less than the National Living Wage or National Minimum Wage (whichever applies), so any employee that is being underpaid has the right to report this to HMRC, and this right remains even after they are no longer employed by you.

Even if you are paying your workers at or above the National Living Wage or National Minimum Wage, you could still be underpaying them, which can easily happen when an employer makes wage deductions or doesn’t pay for all time worked, so this is also something to be aware of.