What’s the Difference Between Living Wage and Minimum Wage?
Do you understand the difference between living wage and minimum wage? For any business owner, it’s so important to recognise for the sake of your employees. Living wage vs minimum wage is constantly a topic of conversation in the business world.
Accountants from The Kelvin Partnership can ensure you know all there is about wages and the differences! Helping lots of businesses, of all sizes to overcome struggles and barriers, our team understand that having business conflict is all part of the start-up process. Sticking with our advice, we will help you solve any problem to do with wages!
What is National Minimum Wage?
Depending on your position within a company, the national wage may not apply.
For the UK, the national minimum wage (NMW) you earn is all dependent on age and if you are an apprentice. The UK Government decides what the wage is each year. NMW is given to everyone over the school leaving age – which is normally 16! There are, though, some ways in which the national minimum wage does not apply, for example, if you are a volunteer or company director/run your own business!
Minimum Wage Age Brackets;
Depending on the age of you employees, minimum wage bands are different!
- Apprentice – £3.50
- Under 18 – £4.05
- 18 – 20 – £5.60
- 21 – 24 – £7.05
- 25 or older – £7.50
What is the National Living Wage?
The national living wage was introduced in April 2016. Meaning that anyone over the age of 25 years old, who is not in the first year of an apprenticeship, is to now be paid £7.50. If businesses fail to pay eligible employees the national living wage, it can come with great consequence – like a penalty!
What is ‘Living Wage?’
The Living Wage is set up by a foundation and not the Government.
However, as well as the National Minimum Wage and the National Living wage, the Living Wage also exists. This is different National Living Wage. The Living Wage was created and calculated by the Living Wage Foundation, an organisation who has no connection to the Government! The living wage calculated, is based from a more realistic estimation of what is needed to be earned in order to live in the UK.
The living wage for the UK is calculated at £8.45. Though it is not the law to pay employees this amount an hour, many businesses like Handmade Cosmetics company LUSH, see the benefits. They claim employee work attitude is improved and absences are fewer, another thing to consider when discussing living wage vs minimum wage!
Living Wage vs Minimum Wage
No matter what industry your business is in, deciding on the wage best for your business is vital!
The main challenge when it comes to deciding on wages, is what are the benefits? Depending on your business, the opportunity for promotion and your business’ stage in its life can all affect payroll decisions. A Glasgow accountant from The Kelvin Partnership can help you decide what is best for your business. However, it is proven that paying employees Living Wage would improves productivity, mood and reduces absences!
Here at The Kelvin Partnership we like to make sure that you are kept up to date with the latest financial and business news or advice. Look at our last post, to learn more about business funding!
So, need help in deciding on the most appropriate wage? Contact us today!
