Voluntary living wage increases by almost 7% to £13.45

The voluntary living wage (VLW), which is overseen by the Living Wage Foundation and often termed the ‘real’ living wage, today rose by 6.7% to £13.45. Meanwhile in London the rate now stands at £14.80, an increase of 6.9%. Accredited Living Wage employers, of which there are now over 16,500, have until May 2026 to implement these increases, although they are encouraged to do so as soon as possible.

As well as direct employees aged 18 and over, the rates also cover outsourced staff such as cleaners and security guards working indirectly for accredited organisations. The Foundation estimates that over 490,000 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.

How the level of the voluntary living wage is calculated

The level of the VLW is calculated by economists at The Resolution Foundation, an independent think tank, on behalf of the Living Wage Foundation. It is based on a basket of goods and services that draws on the Minimum Income Standard as produced and updated by the Centre for Research in Social Policy at Loughborough University to identify the everyday living costs that underpin an acceptable standard of living.

To capture the varying needs of different sections of the population, the calculation takes into account the essential expenditure of 17 different household types (a weighted average is determined based on the population of each household type). Differing needs might include the cost of children’s swimming lessons or five supermarket polo shirts for families; transport for working-aged people; and postage (for example, to be able to send birthday cards) for older people. A common theme across all groups is the ability to exercise and spend time with others. A holiday, based on the cost of a week at Butlin’s, is also included. Once a list has been agreed, it is priced up (based on government data as well as sources such as supermarkets) to work out the net income required to meet the standard. The higher London rate reflects the greater cost of living and working in the capital, for example in respect of housing and childcare costs, although some expenses there (such as transport) may be lower.

Factors influencing this year’s increase include continued high inflation; upward pressure from changes in the Minimum Income Standard last year; and changes to assumptions on working hours (the calculation had previously assumed that all those in the scope of the VLW worked full-time, but clearly this is not the case). So that the cost to small businesses is not excessive, annual uplifts are capped at CPI inflation plus 3%, rounded to the nearest 5pph.

New voluntary living wage is 5.8% higher than latest forecast for statutory minimum

Meanwhile the most recent forecast from the Low Pay Commission (LPC) is for the National Living Wage (NLW), the ‘adult’ statutory minimum pay rate for workers aged 21 and above, to rise by 4.1% to £12.71 in April 2026 (this is a central estimate, with projections ranging from £12.55 to £12.86 – representing increases of between 2.8% and 5.3%). This would result in a differential of 74p or 5.8% between the new VLW and the NLW – somewhat larger than last year’s differential, which was 50p or 4.1%. However, the LPC has already increased its projections once this year and warns that the central estimate and range around it may continue to rise if average earnings growth continues to outperform forecasts. The actual NLW rate is unlikely to be announced before the autumn Budget on 26 November.