Ali Fitzsimons
According to TimeOut, London is now the fourth most expensive city in the world to live. So, it comes as no surprise that 75% of Londoners cite the cost of living as their main concern.
London Weighting offers your team supplemental wages as a small yet necessary respite from the mountainous costs that come with living or working in London. But how does it actually work?
In this guide, we’ll look at the ins and outs of London Weighting and how you can ensure you’re providing support to your London-based employees.
You can also speak to one of our employee experience experts about London Weighting and learn how to better connect and support your people with a personalised demo.
What is London Weighting?
London Weighting, also known as a ‘London Allowance’ or ‘High-Cost Area (HCA) allowance’, essentially refers to an additional wage for London-based workers to offset the expense of living in the capital.
While this was originally implemented for public sector professions, such as teachers, police and NHS workers, to cope with higher costs of living and encourage key workers to stay in London, the additional wage has now been applied widely across the private sector.
How much is London Weighting?
There is no ‘London Weighting Calculator’ or standard approach to working out the payment at present. And amounts can also vary significantly depending on the employer, which makes it harder to pinpoint a specific value. In addition to this, it can also either be paid as a flat fee or as a percentage of someone’s annual salary.
Another factor that is often considered when calculating payments, is location. Amounts often vary by zone, since Central London house and transport prices are generally more costly than those in some areas of Greater London.
London’s fringe zone is sometimes also considered for the London Weighting wage. This includes areas like Kent, Essex and Surrey, and the amount these workers receive is likely to be less than those living in the capital.
In 2022, Trust For London conducted research on the cost of living in London and recommended the minimum allowance for inner-London should be £9,600, with £6,549 for outer-London.
But these figures are simply a reference for employers to provide their team with a decent cost of living and aren’t enforced at all.
Who is entitled to London Weighting?
Aside from public sector jobs, London Weighting is implemented by an employer on a case-by-case basis and, as such, there isn’t an official list of requirements to be eligible for London Weighting. 
In the private sector, it’s up to each individual company to decide whether to offer this benefit to employees working in the capital.
While London Weighting is mainly awarded to those who work and live in London, it can also be afforded to those who reside outside of the city and commute. For part-time employees, it can be offered on a pro rata basis.
The considerations for who is entitled to London Weighting have also changed following the pandemic, as many companies have allowed their employees to work from home, either full- or part-time.
How does London Weighting work?
The London Weighting allowance is considered a type of pay adjustment for London-based workers and is typically paid on a monthly basis, contributing to an employee’s annual salary.
Does the government pay London Weighting?
The government pays London Allowance for some public sector professions, like the NHS, teachers and Metropolitan or City of London police.
In the private sector, London Weighting is paid by individual employers, if they offer the incentive.
Is it taxable?
London Weighting is not tax-free, as it's added to your employee’s gross pay before deductions for tax and National Insurance.
So, bear in mind this compensation could increase someone’s salary enough to move them into a higher tax bracket.
Is it pensionable?
The London Allowance is generally recognised as a pensionable aspect of an employee’s salary as it’s added to their gross salary, and is included when employers calculate pensionable earnings.
What’s the difference between London Weighting and London Living Wage?
London Weighting is an employee benefit that gives staff an additional earning on top of their salary, whereas the London Living Wage is an hourly pay rate increase on top of the National Living Wage.
Both of these schemes are optional and can be implemented to subsidise the higher costs of living in London, incentivising employees to stay in the capital.
Why is it important for employers?
So, the question is: should you provide London Weighting for your team?
Offering this supplemental income benefits the company just as much as its people. Providing valuable discounts, benefits and incentives– like London Weighting – to employees is crucial for a number of reasons, be it talent recruitment, employee engagement, supporting wellbeing and increasing retention.
Many people living and working in London are struggling to meet the Minimum Income Standard. For many, they simply wouldn’t be able to afford to stay in London without this additional payment.
While it's only one piece of the employee experience puzzle, London Weighting is still a significant contributor toward a better living standard for employees, enhancing their quality of life and productivity at work.
Employer strategies for London Allowance
If you decide to provide London Weighting to your employees working in the capital, here are some tips to ensure you get the most out of this incentive:
- A universal policy – If you decide to provide London Weighting, this should apply to all London-based employees, regardless of their role. Picking and choosing who gets this extra income may cause conflict or accusations of discrimination, negatively impacting your workplace
- Fair compensation – London Weighting can be paid as an annual flat fee or as a percentage of salary, but by offering this as a flat fee it ensures all employees receive the same compensation
- Firm and fair – It’s also important to create a clear, watertight policy that doesn’t allow room for interpretation. This should include strict parameters for who is eligible and state that the annual allowance figure is subject to change
If you’d like to find out more about London Weighting – as well as other ways to support your employees and boost their financial wellbeing through benefits and rewards – schedule a free demo and chat with one of our employee experience experts today.
