Half a million workers are in line for a pay rise worth more than £1,250 a year after the real living wage was increased to £14.10 an hour across the UK and £15.45 in London.

The new rates, announced by the Living Wage Foundation, apply to the almost 17,000 employers who have signed up to pay the voluntary rate, which is calculated each year according to the actual cost of living.

The increase of nearly 5% comes at a time when household budgets remain under severe pressure from energy bills, food prices and housing costs, and just weeks before the Chancellor delivers his first Budget.

What is the real living wage?

Unlike the statutory National Living Wage, which is set by the government and currently stands at £12.71 an hour for workers aged 21 and over, the real living wage is a voluntary benchmark based on what people need to cover everyday essentials.

The rates are calculated each autumn by the Resolution Foundation and overseen by the Living Wage Commission. Employers who sign up commit to paying at least the hourly rate to all directly employed staff and, over time, to regular contracted workers such as cleaners and security guards.

The gap between the two rates is stark. A full-time worker on the statutory minimum earns around £1,400 a year less than someone paid the real living wage outside London, and the gap in the capital is wider still.

Unions demand more

Union leaders welcomed the increase but said it exposed the inadequacy of the statutory floor. UNISON general secretary Andrea Egan said the new rate "highlights the urgency of the prime minister getting to grips with the cost-of-living crisis".

"With essentials such as food and energy set to rise further, millions of workers on the legal minimum are being left behind," she said, calling for the government to move statutory pay closer to the voluntary rate.

Retail union Usdaw also welcomed the near-5% uprating and called for a substantial increase in the statutory minimum when the Low Pay Commission's recommendations take effect next April.

Who pays it?

The network of accredited living wage employers now spans major high street names, banks, supermarkets, councils, universities and charities. Around one in eight UK employees works for an accredited employer.

Campaigners point to research showing that businesses paying the real living wage report lower staff turnover, reduced absenteeism and easier recruitment — benefits they argue outweigh the higher wage bill.

But coverage remains patchy. Hospitality, social care and retail — the sectors with the highest concentrations of low-paid work — also have the lowest rates of accreditation, and millions of workers remain on the statutory minimum.

In Scotland, the picture is marginally better than in some parts of the UK, with a higher share of public-sector and third-sector employers accredited. Yet care workers, hospitality staff and shop workers across the country remain among the lowest paid in the economy, and anti-poverty charities say low hourly rates are a direct driver of in-work poverty and food bank use.

The wider picture

The announcement lands in the middle of a difficult autumn for household finances. The energy regulator has warned of a hard winter ahead, and the TUC estimated this week that the average household has paid almost £14,000 more in mortgage, loan, energy and water costs since 2021.

With inflation proving stubborn and the Bank of England warning that businesses are absorbing an energy price shock linked to the conflict involving Iran, pay remains the single most important line of defence for working families.

For the half a million workers whose employers are signed up, the rise will arrive in pay packets over the coming months. For everyone else on low pay, the wait continues — and the gap between what the law requires and what life costs has rarely been more visible.