With everything seemingly more expensive than it was last year, any extra money in your pocket can be a real boost. But finding extra cash is rare at the best of times and it’s unlikely you’ll scrape anything close to a life-changing sum from under the sofa cushions.
So it’s good news all round with the new National Living Wage rates that came into effect in April last year.
What is the National Living Wage?
The National Living Wage is the minimum amount workers over the age of 25 can be paid per hour. The new National Minimum Wage was set by the government in April and is £8.21 per hour, which is 38p higher than the old minimum. This means if you’re employed (rather than in the first year of an apprenticeship) and over the age of 25, you’re legally entitled to earn at least £8.21 per hour.
Who will be affected by the increase in the National Living Wage?
Full-time employees who are over 25 are directly affected by the increase. However, the Resolution Foundation believe even more people will benefit from the new rate, as the increase may have a knock-on effect for workers who are higher up the pay scale as employers could hand out pay rises across the board to maintain pre-existing pay grades and to ensure fairness.
Some companies already pay entry-level employees (who would typically only get minimum wage) more than the legal minimum, and there are several companies who voluntarily pay what’s known as the Living Wage or London Living Wage.
What are the Living Wage and the London Living Wage?
The Living Wage and the London Living wage are voluntary guidelines, so they’re not legally enforceable. The living wage figures are calculated yearly and represent the minimum a full-time worker needs to earn to afford an acceptable standard of living. The London Living Wage is set specifically for people living and working in London. The living wage is currently £9.00 per hour and this rises to £10.55 per hour in London.
What difference will the increase make to the Living Wage?
The increase could make a big difference to the lives of millions of employees. Earning a little extra can be a real boost for morale and can also mean an increase in financial security and open up the possibility of starting a savings account or paying money into a pension.
But it’s not just the employees who benefit. Companies who increase wages often see an increase in employee loyalty and retention. Companies opting to pay the Living Wage and London Living Wage could see employee satisfaction go up and as a result could spend less on recruitment due to a decrease in employee turnover.
How can you work out if you’re being paid fairly in the UK?
By law, your employer must pay each employee fairly and they must not pay less than the appropriate national minimum, but even if you’re getting the minimum wage, how can you know if that’s the market rate for your job?
The first thing to do is go online and check out one of the many salary calculators that can tell you what the average person with your job title is earning. These are approximate figures, but they’ll give you a decent idea of what you should be getting.
Another way to ensure you’re not being underpaid is to routinely check the job boards to see if there are similar jobs being posted. Most of the time these adverts will include salary details for you to compare with your own wage packet.
You can also ask a recruiter what the current average is for similar jobs to yours. Recruiters will be keen to help you, especially if you find you are getting drastically less than you should be getting and you decide you want to look for a new job.
When you’re satisfied you’re being paid fairly, it’s time to think about what to do with the extra money from the National Living Wage increase.
How to put the extra cash to good use
If you’re in need of a break, you can use the extra cash to take a holiday, but this is a quick way to say goodbye to all your hard earned money. Once the holiday is over and it’s back to work, you may regret being so frivolous and wish you’d put it to better use instead.
If you’re looking to make your money go a bit further, then saving can certainly pay dividends in the longer term. There are plenty of options available, but one of the best ways is to put your money into a cash ISA (individual savings account) as it’s tax-free so it maximises the interest you can earn.
Another thing to think about is using the money to protect your loved ones in the event of something happening to you. The extra money you earn per hour could go towards Life Insurance and take the worry out of what your loved ones will do if you can no longer provide for them.
Life Insurance is affordable, especially if you’ve benefited from the recent National Living Wage increase. If you have mortgage or rent payments that you take care of, a Life Insurance policy could cover those costs and mean your loved ones might not lose their home after your death. You can also arrange for the policy to pay off any debts you might have and you can tailor your policy to suit your exact needs and decide how the money is paid out.
Another reason to have a Life Insurance policy in place is to secure a future for your children in case you’re not around when they need you to help pay for their education.
There are so many options out there and if you’re careful, that extra money in your pay packet could go a long way and make a big difference to you and your loved ones.