Living Wage versus legal compliance in the charity sector: Why getting it right matters

Living Wage vs. National Minimum Wage

• Living Wage: A voluntary rate calculated to reflect the cost of living
• NMW: A statutory minimum that all employers must meet, regardless of accreditation

Charities often assume that paying above the NMW rate means they’re safe. In reality, compliance goes beyond hourly pay. It includes:

• Working time calculations
• Deductions for items like uniforms
• Accurate record-keeping

Why does this matter for Living Wage employers?

Charities that proudly promote their Living Wage status risk reputational damage if they fall short on NMW compliance. HMRC focuses on outcomes, not intent, and penalties can be severe: up to 200% of underpayments across six years, plus public naming.

Common pitfalls for charities

Breaches often arise from scenarios that seem harmless:

• Volunteers performing duties equivalent to paid work, potentially creating NMW entitlement
• Salaried staff working unpaid extra hours
• Missing or incomplete working time records
• Salary sacrifice arrangements
• Small deductions for uniforms, equipment, training

These issues can quickly add up, putting charities and not-for-profits at risk.

Proactive compliance is key

For charities, the solution lies in regular, proactive reviews of NMW compliance processes. By staying one step ahead, charitable organisations can:

• Protect their people
• Safeguard their reputation
• Continue to demonstrate leadership in fair pay

Living Wage accreditation is a powerful statement, but true leadership means ensuring compliance at every level.