The national living wage (NLW) applies to workers over the age of 25, and on 1st April 2020 is set to increase by 6.2% from £8.21 per hour to £8.72 per hour. This pay rate is legally binding for employers in Scotland and around the UK.
The NLW is calculated using a percentage of median earnings, and the government aims to make the national living wage 60% of median earnings in 2020. The national living wage has been criticised by some, however, given that the actual cost of living isn’t used as the basis for calculation.
With other minimum wage levels also in existence – the national minimum wage (NMW) and the real living wage – it can be a confusing system to understand, so how do the various minimum wage models differ?
National Minimum Wage (NMW)
The national minimum wage is a statutory wage level for workers aged 21 and over. It’s a negotiated pay rate that’s recommended by trade unions and businesses, and takes account of how much employers can afford to pay. The national minimum wage is set to rise to £8.20 per hour in April 2020 for those aged 21 to 24 years of age.
Real living wage
The ‘real living wage’ is calculated using the actual cost of living and pay needs of workers in Scotland and the UK, and currently stands at £9.30 per hour outside of London. Businesses can pledge to pay their workers the real living wage if they wish, and become accredited ‘real living wage employers.’
The rise in the national living wage means full-time workers over the age of 25 will be better off by almost £1,000 a year, receiving an uplift in pay of £930. The Scottish government has criticised the national living wage, however, stating that the real cost of living should be used as a basis for pay, as happens with the real living wage.
At their 2019 annual Party conference, and also in the General Election manifesto, the Conservative Party said they would increase the national living wage to £10.50 per hour over the next five years if it was economically viable to do so, but these rises also impact on businesses.
The legal obligation for employers to pay the new national living wage rate means some smaller businesses might struggle to afford the increase in payroll costs. The changes will be a welcome relief to households around Scotland, however, hopefully bringing about an improvement in living standards and a more secure financial future for many.
Scotland Debt Solutions has been helping Scottish residents to escape debt since 1989, and can provide more information on the 2020 national living wage rises. We operate from a number of offices around Scotland, and offer free same-day meetings to quickly provide the help you need. Please contact one of our expert team to find out more.
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