COMPLIANCE
Increasing the minimum wage
Tony Gordon, policy advisor, national minimum wage (NMW) at the Department for Business and Trade discusses the historic rise to NMW and national living wage (NLW) rates coming in 2024, which marks the 25th anniversary of the minimum wage in the UK
A pril has become synonymous with an array of changes to taxes and other government financial policies. Payroll professionals know that this includes the annual increases to the NLW and NMW rates. But do you know what makes this April even more special than usual? 25 years 2024 marks the 25th anniversary of the minimum wage in the UK. The policy has come a long way since the National Minimum Wage Act came into force on 1 April 1999. Back then, the rate was set at £3.00 an hour for 18-20-year-olds, and £3.60 for those aged 21 and over. The UK is rightly proud of its international reputation for excellence when it comes to setting the minimum wage rates each year, and the government has once again accepted the recommendations of the Low Pay Commission (LPC) for the new rates. The LPC is an independent and internationally renowned body, which is made up of business representatives, worker representatives and independent academics. It carries out extensive stakeholder consultation and wider
research to strike an appropriate balance between the needs of workers, affordability for businesses and the impact on the wider economy. "With 2.9 million workers projected to directly benefit from these increases, across every region and nation of the United Kingdom, and in every sector of employment, it’s fair to say that this is a policy with one of the very biggest impacts" As we approach the ‘silver jubilee’ of the minimum wage, it’s a cause for celebration of the many successes of the policy over its history. The minimum wage has helped to end extreme low pay in the UK, it has lifted many workers out of
poverty and it has continued to increase every year. This was the case even during the financial crisis of the late 2000s and, more recently, during the unprecedented period that was the Covid pandemic. A historic year But Monday 1 April 2024 is a historic day for another reason. The new NLW rate will be £11.44 – this is an increase of £1.02 an hour, or 9.8%, from the current hourly rate of £10.42. Through this record cash increase, the government is achieving its long-held ambition for the rate to hit two-thirds of median hourly earnings. This will end low hourly pay, as defined by The Organisation for Economic Co-operation and Development (OECD), for those eligible. The NLW will be extended to those aged 21 and over (currently it's for those aged 23 and over), while the NMW rates, which apply for younger workers and apprentices, will also see large increases. The 2024 increase will give a full-time worker on the NLW a boost to their gross annual earnings of over £1,800 per year. In total, the annual earnings of a full-time worker on the NLW will have increased by over £8,600 since it was announced
| Professional in Payroll, Pensions and Reward | March 2024 | Issue 98 20
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