'Real Living Wage' increased to £8.45 per hour - £1.25 more than minimum wage

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The real Living Wage will rise 20p per hour to £8.45, while the London rate will go up 35p to £9.75 per hour from 2017.

The increase means a gap of £1.25 between the voluntary wage, backed by the Living Wage Foundation campaign group, and the government’s minimum standard which is £7.20. In London the Gap is £2.55. Campaigners and unions have said that the government's minimum standard must by increased further to reflect the true cost of living.

Around 3,000 businesses have signed up to the voluntary standard, including 1,000 in the capital.

Frances O’Grady, TUC general secretary, said: ”This is a welcome rise. Working people should have the right to expect a fair days pay for an honest day’s work.

“Unlike the government’s minimum wage, this real Living Wage is based on a review of the evidence on what is happening to people’s living standards right now.”

The Living Wage Foundation sets the wage based on research by the Resolution Foundation. Accredited employers must ensure they pay all workers the living wage rate, including subcontractors and agency workers.

Curzon Cinemas, the British Library and RSA Insurance have all recently signed up as living wage employers.

Katherine Chapman, director of the Living Wage Foundation, said: “Today's new living wage rates bring a welcome pay rise to thousands of workers across the UK.”

“One in five people earn less than the wage they need to get by. That's why it's more important than ever for leading employers to join the growing movement of businesses and organisations that are going further than the government minimum and making sure their employees earn enough to cover the cost of living.”

“Over 1000 employers in London ranging from FTSE 100 companies to small independent coffee shops are now leading the way on tackling low pay in the capital, making sure their employees earn a wage that they and their families can live on.”

Announcing the new London rate at the British Library on Monday, the mayor of London, Sadiq Khan, said: “Our economy continues to grow and for the first time in London’s history we now have over one million businesses based here.

“It’s essential that hard-working Londoners, who keep this city going, are rewarded for their integral role in this success.

“As many employers already accredited know, the benefits are clear - including increased productivity and reduced staff turnover. I’ll be working to encourage more businesses across our great city to get involved.”

The news comes as official figures show that the average UK salary is less now than it was in 2004.