The Living Wage Foundation has today announced that the voluntary (or ‘real’) living wage (VLW) rate will increase by 5% from £12.00 to £12.60, while the London rate will rise by 5.3% or 70p, to £13.85. The new rates apply with immediate effect but accredited Living Wage employers, of which there are now more than 15,000, have until 1 May 2025 to implement them.
As well as direct employees, the rates also cover outsourced staff such as cleaners and security guards working indirectly for accredited organisations. The Foundation estimates that over 475,000 people will benefit directly from these increases; in practice the true figure could be higher as our research has often found that some employers in low-paying sectors, who may not seek full accreditation for logistical or future affordability reasons, also reference the VLW rates when setting pay rates.
The VLW rate is calculated by the Resolution Foundation, overseen by the Living Wage Commission, based on a basket of goods informed by the Minimum Income Standard. The Foundation’s intention is that it should reflect the true cost of living and in recent years the national rate has been between 4% and 5% higher than National Living Wage (NLW), the ‘adult’ statutory minimum pay rate, which is currently calculated as a percentage of median pay. However, with the Government’s latest remit for the Low Pay Commission calling for greater focus on cost-of-living factors when making recommendations for the level of the NLW, we may start to see greater convergence between the two rates.
The most recent forecast from the Low Pay Commission is for the NLW to rise to £12.10 in April 2025 (this is a central estimate, with projections ranging from £11.82 to £12.39). This would result in a differential of 50p or 4.1% between the new VLW and the NLW. The actual NLW rate could be announced as soon as next Wednesday’s Budget.
