Living Wage to rise by 20p an hour
The Living Wage is to increase by 20p to £7.85 an hour, boosting the pay of 35,000 workers, it has been announced.
The new figure was revealed as a new study showed that 5.2 million people, or 22% of the workforce, are paid less than the Living Wage - an increase of 1% over the past year.
A higher hourly rate will be announced by London Mayor Boris Johnson for the capital later, to replace the current £8.80.
Both figures are well above the national minimum wage of £6.50 for adults.
Meanwhile, food giant Nestle has become the first major manufacturer to become a principal partner of the Living Wage Foundation.
The number of employers who have signed up to pay the Living Wage has more than doubled this year to over 1,000, including 18 in the FTSE 100, such as Standard Life and Canary Wharf Group.
Rhys Moore, director of the Living Wage Foundation, said: "As the recovery continues it's vital that the proceeds of growth are properly shared. It's not enough to simply hope for the best. It will take concerted action by employers, government and civil society to raise the wages of the five million workers who earn less than the Living Wage.
"Those businesses that can should follow the example of Nestle and Nationwide, as well as hundreds of smaller, independent businesses like CTS Cleaning and independent building contractor Hodgson Sayers, who pay the Living Wage.
"Low pay costs the taxpayer money - firms that pay the minimum wage are seeing their workers' pay topped up through the benefits system. So it's right that we recognise and celebrate those employers who are voluntarily signing up to the higher Living Wage, and saving the taxpayer money in the process.
"The Living Wage is an independent calculation that reflects the real cost of living, rewarding a hard day's work with a fair day's pay."
KPMG said the number of people paid less than the Living Wage had increased by 147,000 over the past year, with a "worrying trend" of rises among part-time, female and young workers.
Mike Kelly of KPMG, said: "Although there are almost 1,000 organisations pledged to pay a Living Wage, far too many UK employees are stuck in the spiral of low pay.
"With the cost of living still high, the squeeze on household finances remains acute, meaning that the reality for many is that they are forced to live hand to mouth. Inflation may be easing, but unless wages rise we will continue to see huge swathes of people caught between the desire to contribute to society and the inability to afford to do so.
"For some time it was easy for businesses to hide behind the argument that increased wages hit their bottom line, but there is ample evidence to suggest the opposite - in the shape of higher retention and higher productivity. It may not be possible for every business, but it is certainly not impossible to explore the feasibility of paying a Living Wage."
Matt Stripe, HR Director of Nestlé UK & Ireland, said: "As a major UK employer we know that acting responsibly is not only good for the communities we operate in, but also makes good business sense.
"Supporting the foundation as a principal partner underlines our belief that people are at the heart of our business. We are proud to be the first mainstream manufacturer in the UK to become a Living Wage employer and see this as an opportunity to be a positive influence in our sector."
TUC general secretary Frances O'Grady commented: "People deserve a fair day's pay for an honest day's work, but low pay is blighting the lives of millions of families, and it's adding to the deficit because it means more spent on tax credits and less collected in tax.
"We have the wrong kind of recovery with the wrong kind of jobs. We need to create far more living wage jobs, with decent hours and permanent contracts.
"The fact is there are employers out there who can afford to pay living wages, but aren't. It is now time for all responsible employers to commit to adopting this standard, which enables workers to earn just enough to be able to live a decent life."
The London Living Wage rate is calculated by the GLA's Living Wage Unit, with cross-party support.
The rate outside London is calculated annually by the Centre for Research in Social Policy at Loughborough University, with funding from the Joseph Rowntree Foundation.
John Allan, chairman of the Federation of Small Businesses, said: "The Living Wage is and should remain an important aspirational goal for firms to strive for.
"More than half of small businesses already pay the Living Wage or above, are recognising the benefits to their business in terms of staff morale, performance and recruitment, but it should remain a voluntary goal.
"A mandatory Living Wage would pose considerable risks to small businesses in certain sectors, especially retail and health and social care. We want Government to reduce other business costs, which would enable small firms to pass on the savings to their staff in the form of higher wages."
Martin Smith, national officer of the GMB, said: "While an additional 20p an hour would be a welcome pay rise, our members know that you can't live on this Living Wage. They tell us that, in their experience, you need at least £10 an hour and a full working week to have a decent life free from benefits and tax credits.
"Less than £10 an hour means just existing, not living. It means a life of isolation, unable to socialise, a life of constant anxiety over paying bills and of borrowing from friends, family and payday loan sharks just to make ends meet - it's no life at all on the Living Wage."
A Business Department spokesperson said: "In the last year alone, we have seen the biggest cash increase in take-home pay since 2008, benefiting over one million workers and more people in work than ever before.
"We support businesses that choose to pay the Living Wage, however only when it is affordable and not at the expense of jobs."