Should all employers be paying the new living wage? | Moorepay
September 27, 2022

Should all employers be paying the new living wage?

The new living wage 2022

The real living wage has been raised early this year, increasing by a whopping 10% to £10.90 per hour. With this new figure, coupled with the rising costs of living, should employers be increasing wages to match the new ‘real’ living wage?

There’s constant talk in the news of the costs of living crisis, energy bills increasing and the 40-year high inflation rate, which is still climbing. With all this going on, the topic of pay rises is on everyone’s minds. Employers are no doubt wondering, should they be increasing wages to match the new ‘real’ living wage?

Employers are looking for more ways to support employees during the cost of living crisis. Salary increases may seem like the simplest solution. However, salary increases aren’t always the way forward – especially when many businesses are also struggling with the increased costs.

What is the real living wage?

The ‘real’ living wage is an hourly rate based on the basic cost of living in the UK and unlike the national minimum wage, it’s optional for businesses to pay this rate to their employees. The calculation takes into account the amount workers need to be able to get by and pay bills such as housing rent, utilities food. 

It’s independently calculated each year and is set as an advisory to employers.

Currently, it’s voluntarily paid by over 10,000 employers in the UK.

The current ‘real’ living wage is now set at £10.90, whereas the national minimum wage is only set at £9.50.  Since the national minimum wage was introduced in 2016, it has improved and moved closer to the actual cost of living, but there is still a significant gap.

Should everyone be paid the real living wage?

Although average wages did increase by 4.7% up to June 2022, in real terms when compared to inflation, the real value of pay dopped by 3% compared to this time last year.

Key workers and trade unions have recently taken drastic action including strikes across the country.  This has caused major disruptions as employees fight for fair pay that matches inflation and addresses poor working conditions. But will an increase in wages really solve everyone’s problems?

According to The Bank of England, increasing wages will increase spending, but also increase prices of goods to keep up with this. The Bank of England has opted to increase interest rates, which they say will decrease spending.

Charles Cotton, Senior Reward and Performance Adviser at the CIPD, urged companies to continue to pay the real living wage despite the dire economic outlook: “The increase in the living wage comes at a time when many employers are also struggling with increased costs. However, there can be benefits from paying the living wage. Not only can it benefit employees, such as improving their financial wellbeing, but it can also result in benefits for the business, such as improved brand reputation, reduced employee turnover, or higher staff commitment”.

The effect on payroll

Over the pandemic, payroll professionals became unsung heroes as they kept up with constantly changing legislation and ensured that at a time when everyone had worries, their pay was never one of them. But, with the new ‘real’ living wage being announced and more employees opting to match this amount, this will obviously bring more burden to our heroes without capes. On the reverse of this, companies who choose not to match this will face more backlash from employees and must introduce more initiatives in lieu of more financial compensation, and maybe consider non-financial compensation. 

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Sophie Mae Powell
About the author

Sophie Powell

Sophie Powell is an experienced marketer specialising in Product Marketing, who joined Moorepay in 2022. With a Bachelor's degree in Business, Management, Marketing, and Related Support Services from Northumbria University, she's since built on her skills with years working in marketing, more recently in the payroll and HR industry. At Moorepay, Sophie helps our audience learn about our products. She knows the ins and outs of the payroll industry as well as Moorepay's expansive product base. Outside of work, Sophie loves most of all her two high-maintenance dogs and trips to Costco.