There are two Living Wages:
- The Living Wage
- The National Living Wage
The Living Wage is calculated according to the cost of living and is set by the Living Wage Foundation. Whereas the government sets the National Living Wage and it is a rate based on median earnings.
The Living Wage
The Living Wage is an hourly wage rate that an employer may voluntarily pay its employees.
The Living Wage is calculated based on the basic cost of living in the UK, is set independently by the Living Wage Foundation and is reviewed on an annual basis.
Because the cost of living in London is relatively high compared to the rest of the UK there is also a London Living Wage in addition to the UK Living Wage.
The National Living Wage
The National Living Wage is not voluntary as it is set by the UK government. For all staff over 25 years old in the UK, employers are obliged to pay a minimum wage premium called the National Living Wage.
The scheme was introduced in April 2016 and the government has set a target for the Low Pay Commission. By 2020, the minimum wage premium for employees aged over 25 should be 60% of median earnings.