Low Pay Commission Recommends Minimum Wage of £6.50 for Adults
The Low Pay Commission (LPC) has recommended an increase of 3% to the national minimum wage (NMW), higher than the current Consumer Price Index (1.9% in January) & Retail Price Index (2.8%), meaning a real-terms increase for NMW workers is likely this year. This would increase the minimum amount workers aged 21 or older have to be paid to £6.50 an hour – a 19 pence increase from the current £6.31, or a weekly increase of £7.60, to £260, for a 40 hour working week.
The government is still free to reject the recommendations of the LPC (this is rare, but it has happened: the original youth rate was recommended to be set at £3.20 an hour, but the then Labour government opted for £3; in 2008, the LPC recommended that 21 year olds should receive the adult rate, although the recommendation was adopted in 2010), but if it is accepted, this would be the first real-terms increase in six years – since 2008.
As the Chancellor said last month that the economy can now afford to raise the rate above inflation, it is probable that the government will accept this year’s recommendations in full.
Changes will not be confirmed until around April, when the government publish their views on the LPC’s report, and will apply to pay reference periods commencing after 1 October 2014.
Only a 2% Increase for Under 21s & Apprentices
The proposed increases for the Youth Development Rate (workers aged 18-20) is only 2% (from £5.03 to £5.13 an hour), as is the 16-17 Year Old Rate (from £3.72 to £3.79) & the Apprentice Rate (from £2.68 to £2.73). This is said to be to “increase their [young workers] relative attractiveness to employers” (paragraph 29 of the report).
The accommodation offset – where employers provide accommodation as part of the employment – is recommended to increase by 3.5%, to £5.08 a day.
Update (12 March 2014):
Recommendations Accepted in Full
Earlier than anticipated, the government has today accepted the recommendations of Low Pay Commission, approving an above-inflation rise in the minimum wage. The increases to the NMW will apply to work performed on or after 1 October 2014, based on when the next Pay Reference Period falls, not necessarily 1 October itself.