UK employers paying the voluntary “living wage” have been urged to deliver an early increase of more than 10 per cent so that their lowest-earning workers can keep pace with soaring prices.
The Living Wage Foundation, a charity that campaigns for fair pay, said on Thursday that it was increasing its national living wage rate from £9.90 to £10.90 an hour, the sharpest rise in its 11-year history.
Meanwhile, the London rate — which reflects the higher costs of living in the capital — will rise from £11.05 to £11.95 an hour.
The charity recalculates the rate annually based on what people need to live on but brought forward this year’s change by two months because of the cost of living crisis.
Katherine Chapman, the foundation’s director, said the existence of the voluntary rate was “more vital than ever” because millions of people were facing a “heat or eat choice this winter”. She added that the uprating would give workers and their families “greater security and stability”.
The announcement comes a day before Kwasi Kwarteng, the chancellor, is due to outline a cut in national insurance, which will disproportionately benefit the better-off.
The UK’s statutory minimum wage — whose main adult rate stands at £9.50 — rose 6.6 per cent in April. But that increase, initially intended to be generous, has already turned into a real-terms cut, with consumer price inflation running at 9.9 per cent in August.
Average wages have been rising rapidly in nominal terms, leading Bank of England policymakers to worry they will contribute to persistently higher inflation. But prices have been rising even faster, leaving households facing the sharpest drop in living standards for at least 20 years.
Data published on Wednesday by the research group XpertHR showed that the median basic pay award employers offered staff in the three months to August remained steady at 4 per cent — high by historic standards but well below the peaks reached in previous periods of very high inflation.
The rise in the voluntary living wage will directly affect about 400,000 people working for just over 11,000 employers accredited by the charity. However, many more could be indirectly affected, since some large employers including supermarkets use the living wage as a benchmark, albeit without committing to apply it throughout their supply chain.
Charles Cotton, an adviser at the CIPD body for HR professionals, said Thursday’s increase was “significant” but that employers should still look at other ways to support workers’ financial wellbeing.
He said these included guaranteeing working hours and offering occupational sick pay or hardship loans, and added that bosses struggling to afford higher wages should focus on designing jobs and tasks better to raise productivity.
The number of accredited living wage employers has more than doubled in the past two years, as the coronavirus pandemic raised awareness of low-paid workers’ contribution and led companies to compete for staff.
“It’s easy to blame the pandemic or Brexit . . . but the industry is experiencing staff shortages that are partly self-inflicted,” said Christian Kaberg, managing director of the St Pancras Hotel Group, which runs six venues in central London and won accreditation in 2019.
He added: “As an industry and an employer, we need to start doing the right things — and one of them is paying people properly.”