As part of the new Labour governments proposed 40 bills which formed part of the Kings Speech delivered on Wednesday 17th July 2024, was the inclusion of proposed changes to National Minimum Wage, forming part of the first 100 days commitment.
My Government is committed to making work pay….
Kings Speech 2024
The new government has indicated that as part of it ‘Make Work Pay’ – ‘And through our changes to the Low Pay Commission, we’ll make sure the minimum wage is a genuine living wage’. There is also a commitment to remove what some may see as an age discrimination by removing age differentials.
National Minimum Wage – the current position
The current National Minimum Wage rates are banded by age with a difference also for apprentices.
The National Living Wage start point age has reduced over the years from 25 to 23 to the current 21. The government are committed to taking this further.
The gap between younger ages and the NLW have also shrunk the rate gap with significant annual increases.
The April 2024 changes brought in play the following:
So we may see a timetable to merge all of the age related rates into a single, for all, minimum wage rate.
What about the real Living Wage?
The Living Wage is announced annually (traditionally each November, and sometimes earlier) by the Living Wage Foundation which is a Citizens UK initiative.
Over 15,000 UK employers are now accredited with the Living Wage Foundation, double the number there were three years ago.
1 in 9 UK workers now work for a Living Wage Employer, but over 3.7 million workers are still struggling to make ends meet earning below the real Living Wage.
What next?
What is not yet known is when the governments implementation of what they refer to as a real living wage will be announced or implemented. What is clear is that there is a commitment for change.
If the current rates were to be increased to the current real living wage rate set in 2023, to £12 per hour, then that would represent significant increases for employers:
- The aged 21 rate £11.44 rise to £12 is a 4.9% rise
- The 18-20 £8.69 rise to £12 is a 38.1% rise
- The 16-17 rate £6.49 rise to £12 is a 56% rise
Will a differential be retained for apprentices?
What other potential impacts?
Of course a rise in National Minimum Wage is the equivalent of a pay award, so there are considerations for having to recalculate SMP pay,ents under the Alabaster ruling.
And with the popularity of increased salary sacrifice arrangements, employers will need to reconsider their benefit offerings as an increasing group of employees will be closer to National Minimum Wage breach.
Whether Cycles, tech, pensions are part of flexible arrangements for these levels of hourly pay rates across all work time are impacted will need to be assessed. There is some views that the Department of Business and Trade should review NMW rules to allow employees to participate in these benefit arrangements as they provide better affordability. we will have to see whether any change is forthcoming, or we see increased numbers of named and shamed employers.
With significant increases to the youth rates, will we see this impact youth employment levels? In fairness, a sizeable group of employers do not differentiate on age and pay the same starting rates across all ages.
PAYadvice.UK 22/7/2025