COMPLIANCE
What’s next
for NMW?
Jeni Morris ACIPP, head of the national minimum wage (NMW) team, EY, talks us through what could be next on the horizon for NMW and the national living wage (NLW), following the substantial rate increases from April 2024
H ot on the heels of the substantial NMW rate increases for 2024, we’re now seeing discussion around what will happen next for the rates. The Low Pay Commission (LPC) has made no secret of its desire to gradually lower the age requirement for the NLW from the current 21 to 18. This proposed change is hitting headlines, as a recent LPC report points out that the current wage gap between younger and older workers is “excessive and unfair.” Now, minimum wage rates aren’t as simple as you’d think – they’re divided into different pay rates for different age groups. Currently, we have: ● a specific rate for apprentices ● another for 16-17-year-olds ● yet another for 18-20-year-olds ● the NLW for those aged 21 and above. The NLW first entered the scene on 2016. It met a set target of reaching two- thirds of median hourly earnings when its rate was pushed up by 9.8%, to £11.44 an hour this April. However, the story’s a little different when we talk about the rate for the 18-20-year-olds. Even though it’s
increasing by a larger percentage of 14.8%, it’s still playing catch-up to the wages of older workers. The flip side? This does open a window of opportunity to boost youth wages without having to worry about hitting employment rates. Many sectors employ younger workers, and they’re already struggling with the recent lowering of the NLW age to 21, so extending the NLW bracket isn’t a one- size-fits-all solution and may seriously affect certain sectors. If we look at the hospitality industry, about 60% of businesses are making use of youth rates, according to UKHospitality, indicating a clear industry preference for maintaining the status quo. Although we’re discussing the LPC’s ambitions regarding the rate bands, it’s also important to note that the government recently handed over its instructions to the LPC for future rates, tasking it with holding onto the two-thirds median earnings marker reached by the NLW. Sounds simple? Not quite. To hit this so-called ‘sweet spot’, the LPC reckons the rates must fall between £11.61 and £12.18, with the bullseye being £11.89 for
April 2025. We will have to wait until the autumn to see where the rates will land for next year. “The government recently handed over its instructions to the Low Pay Commission for future rates, tasking it with holding onto the two-thirds median earnings marker
reached by the national living wage”
So, the LPC’s plan? For now, it’s championing the idea of slowly lowering the age eligibility for NLW, providing room to analyse the impact on each age group. This echoes the government’s instructions for 2024, pushing the need for a balanced strategy: one that progresses the minimum wage growth, but not at the expense of employment prospects. In this complex age-based wage puzzle, getting the balance right is key! n
“The Low Pay Commission has made no secret of its desire to gradually lower the age requirement for the national living wage from the current 21 to 18”
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| Professional in Payroll, Pensions and Reward |
Issue 100 | May 2024
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