Increasingly, responsible organisations recognise that an employee’s wage needs to meet the real cost of living. A fair and liveable wage gives employees a chance to lead a dignified life, with access to the opportunities and choices needed to fully participate in society. And, with 74% of employers paying – or planning to pay – at or above the UK’s voluntary real Living Wage, many employers are embracing the business benefits too.

What is 'pay fairness'?

There are three types of pay fairness:

  • Fairness of pay outcomes: how the pay budget should be distributed
  • Fairness of the process used in making pay decisions
  • Fairness in the quality of treatment people receive when pay procedures are implemented.

People professionals play an important role in formally defining what ‘fair’ means in the context of their particular organisation. This, in turn, helps guide management decisions on reward (such as how much to contribute to employee pensions) and shows employees what they can expect from the organisation.

Five ways to foster pay fairness

  1. Be transparent about how pay is set and how people can secure a pay rise, communicating both directly to employees and through unions and employee representatives where appropriate.
  2. Ensure that all job vacancies clearly advertise salary/wage ranges – this demonstrates your organisation’s commitment to transparency.
  3. Pay a wage that enables people to meet the true cost of living and, wherever possible, provide security of hours if workers need it.
  4. Remove any barriers preventing people from working the hours necessary to meet their financial needs.
  5. Ensure that pay outcomes and processes in your organisation are fair – such as by checking the reasons for gender, ethnicity or disability pay gaps and engaging with unions or employee representative groups as relevant.

See the CIPD’s factsheet on pay fairness and pay reporting for more information on:

  • what fair pay means
  • the information you need to disclose by law
  • the opportunities pay narratives bring.

What is a 'liveable wage'?

A liveable wage is one that enables people to lead a dignified life and meet the true cost of living.

It is worth saying that a low wage won’t necessarily mean someone is in poverty, and a decent wage won’t always protect them from poverty. A person on low pay might be able to keep their living costs low if they live with a higher earner, while someone who earns a decent hourly wage could still face poverty if they have particularly high living costs or find themselves stuck on a work contract that doesn’t suit their needs, with too few hours of work to reach an acceptable standard of living, and little chance of progression.  

According to research by the Centre for Research in Social Policy at Loughborough University, a full time job on the National Living Wage in 2021 did not guarantee you the minimum acceptable standard of living that we as a society consider everyone in the UK should be able to achieve. A single person needed to earn £20,400 a year to reach this standard, but the National Living Wage paid just £17,400. A couple with two children could only achieve this standard if they both worked full time, which is simply not feasible for many families due to barriers such as a lack of affordable childcare.

With high inflation predicted to last beyond 2022, it’s unlikely that the planned 6.6% National Living Wage increase in April 2022 will be enough to protect working people from poverty as the cost of living rises. It’s therefore more important than ever that employers seek to understand and alleviate the financial strain their workforces are under.

The UK’s cost-of-living crisis in 2022

UK households are facing an enormous-cost-of living challenge this year. Inflation rates are at a thirty-year high, while soaring energy, food, housing and transport costs impact us all - individuals and business alike. But those on the lowest incomes will be hit the hardest. According to the Joseph Rowntree Foundation, the crisis is set to ‘devastate the budgets of families on the lowest incomes’: low-income households will spend around 18% of their income (after housing costs) on energy bills after April – compared to 6% for middle-income households.

The National Living Wage already failed to protect many households from poverty before the crisis emerged, so the planned 6.6% increase in April 2022 won’t be enough to offset the rising cost of living. According to The Institute for Fiscal Studies, workers who earnt £30,000 in April 2021 now need to see their wages grow by more than 7% to maintain the same standard of living a year later.

With high inflation predicted to last beyond 2022, many employers will be cash-strapped too, with few in a position to offer inflation-beating pay rises. But there are other ways in which they can help. Employers should make an extra effort to understand people’s needs and circumstances, treat them with dignity and respect, identify ways to support their financial wellbeing, and help to break down any barriers preventing them from securing a liveable income (see our tips for providing a liveable income). 'Crucially', says Charles Cotton, Senior CIPD Policy Adviser, Performance and Reward, 'employers need to normalise conversations about money so people don’t feel embarrassed seeking help. The earlier they can act, the less likely money problems will impact their mental wellbeing and productivity.' 

Calculate the minimum income needed for different family types with the minimum income calculator:

Tips for providing a liveable wage

  1. Ensure your hourly rates of pay are high enough to cover the real cost of living – pay at, or above, the voluntary real Living Wage, wherever possible.
  2. Provide workers with the hours they want and need wherever possible, and remove any barriers that could prevent people from working more hours (such as by providing more flexible working options). 
  3. Give reasonable notice of shifts (the CIPD calls for a minimum of seven days, and the Living Wage Foundation recommends four weeks where possible), with options for people to opt in if they want to be contacted when shifts are available at short notice. Provide the option of more predictable hours for people who need them, wherever possible.
  4. Recognise the lengths to which employees often go to make shifts work (such as paying for childcare or transport), by fully compensating for shifts cancelled with less than 24 hours’ notice. 
  5. Ensure that any flexible or ‘atypical’ working arrangements offer genuine choice and flexibility for both parties. For example, ensure that employees feel able to decline shifts that don’t suit them without fear of being withheld shifts in future.
  6. Offer occupational sick pay to enable people to take time off when sick without risking their livelihood.
  7. Break down any real or perceived barriers that prevent people in your organisation from earning a liveable income – for example, a lack of genuine flexible working options or progression opportunities.

Providing workers with the hours they want and need

Even if you pay at or above the real Living Wage, members of your workforce may struggle to earn a liveable income if they’re not able to work enough hours – in other words, if they’re underemployed. In some cases, employers simply may not be able to offer any more hours. But in other cases, some relatively simple measures could help ensure that those who want or need to work more hours can do so:

  • Ensure managers clearly communicate to all employees if there are opportunities for people to work more hours.
  • Put processes in place to make sure everyone gets a fair chance to put themselves forward for extra hours – don’t rely on informal communication channels which rely on managers making assumptions about who may or may not want the extra hours.
  • Offer as many flexible working options as possible, to maximise the number of hours your people can fit in around their other commitments.
  • Provide a right to request more stable or predictable hours to give individuals the confidence to ask for changes to their working arrangements if they don't suit them.
  • If people are on zero hours working arrangements, ensure that these suit their working preferences wherever possible.

The UK’s real Living Wage

The voluntary real Living Wage is an hourly rate calculated according to the basic cost of living in the UK. It’s higher than the Government’s compulsory National Living Wage, which is based on a percentage of medium earnings. The real Living Wage is set independently by the Living Wage Foundation, and around 9,000 employers in the UK have voluntarily signed up as accredited Living Wage employers. CIPD research suggests that even more employers pay the voluntary rate, even if they’re not accredited: 74% of employers pay, or plan to pay, at or above the real Living Wage.

Paying the real Living Wage is not only good for your employees’ financial wellbeing; it’s good for business too. According to the Living Wage Foundation, 86% of accredited employers said it had improved the reputation of their business, while 75% said it increased motivation and retention rates.

Due to the cost-of-living crisis, the Living Wage Foundation has decided to bring the announcement of their 2022-23 Living Wage rates forward to late September 2022.

The real Living Wage rates explained

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What employers have to say

Everton Football Club logo

Being an accredited Living Wage Employer has always been part of our ‘People Strategy’ and we believe it has contributed to our Best Companies accreditation and placing within The Sunday Times 100 Best Companies to Work For. One of the focuses of that accreditation is a ‘fair deal’ [for employees] and our score on this criterion has risen dramatically.

Everton Football Club

Monzo logo

When you pay someone an hourly rate, you often don’t connect how much you pay per hour, with how much that person is actually taking home. I think that’s vital for every employer to consider.

Maria Campbell

Head of People at Monzo

Willmott Dixon logo

We talk about the ripple effect: the ripple down the supply chain of paying the Living Wage is massive. We’ll never be able to measure that in the way that we could measure and showcase a donation to a charity. But we know that somewhere down our supply chain could be a child with a new pair of school shoes because of the real Living Wage.

Willmott Dixon

Linklaters logo

On the Operations side, the quality of service and the reduction of cost in terms of staff turnover, means that [being a Living Wage Employer] pays for itself. From a broader HR perspective, the benefit to the whole workforce is key, in terms of confidence in the firm’s employment practices.


Cardiff University logo

The Living Wage has allowed low income employees to save, arrange swimming lessons for children and make other small but significant changes to family life. About £500,000 a year has been transferred to low wage workers through the University’s Living Wage commitment.

Cardiff University

Explore the business benefits of the real Living Wage:

What employees have to say

Male silhouette

Before being paid a Living Wage, life was difficult, financially for me. I am a single parent, and was working to try and have enough money to pay my bills, and provide for myself and my son. I had no social life, and constantly had to tell family and friends that I was unable to meet them for a meal, drinks.


Female silhouette

By being paid and the real Living Wage it allows you to have more of a social life, family life feeling that you paid and valued for the job that you need rather than the government just giving you the minimum amount that they can get away with paying.


Care Worker for Aspire at Intelligent Care

Male silhouette

The main thing to me is security. I’m always going to get paid this wage every month.


Rider at

Female silhouette

The Living Wage means to me that I can actually live instead of just survive.


Female silhouette

Earning the Living Wage means I'm not so tired, I can give up some extra part time work and there's a little left at the end of the month.


Cleaner, Norwich

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