The National Minimum Wage (NMW) and the National Living Wage (NLW) are both set to rise, following recommendations from the Low Pay Commission. From April 2020, the NLW for workers aged 25 and over will increase from £8.21 to £8.72 per hour (6.2%). This represents an increase of more than four times the inflation rate, and will affect around 3 million workers.
The Government has stated that this will equate to an increase in gross annual income of approximately £930 for a full-time worker on the current NLW.
Average wages across the UK are still lower (after inflation is accounted for) than before the financial crisis, after one of the worst decades for pay growth in 200 years.
The increased NLW does not meet the rate suggested by the Living Wage Foundation, which calculates a voluntary ‘pay floor’ which is used by about 6,000 companies (including Aviva and Nationwide) and reflects what people need to live on. The Foundation’s ‘real living wage’ is currently £9.30 per hour, and £10.75 per hour in London.
The NMW increases apply to apprentices and those under 24. Currently, only NMW legislation is applicable to these age groups.
As detailed in the Government’s election manifesto, the NLW is expected to rise to around £10.50 per hour by 2024, “provided economic conditions allow”. The Government has also announced plans to expand the reach of the NLW to cover workers aged 23 and over from April 2021, and to those aged 21 and over within five years.
Although pay growth has been arrested again in recent times, the increases will go some of the way to help offset the rising cost of living in the UK.
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