Rishi Sunak’s government has announced the highest increase to the National Minimum Wage (“NMW”) in nearly a decade due to take effect from April 2023.
National Living Wage increase
The government has accepted proposals from the independent advisory body, the Low Pay Commission, to raise the National Living Wage (“NLW”) hourly rate by 9.7% from £9.50 to £10.42 for workers in the UK aged 23 or over. This falls against the backdrop of warning signs of a national recession, unexpected rises in inflation and an economic climate where “both employers and workers are worried about rising costs”. The changes are set to benefit over 2 million low paid workers and protect living standards.
The Low Pay Commission reflected in its letter that the increase is likely to be lower next year as GDP growth is predicted to slow down in 2023. Whilst employers seemed to be concerned about wage rises and the impact of inflation, “they were more concerned about other cost pressures”. For instance, the UK economy has recovered from the Covid pandemic at a faster rate than in previous downturns, yet inflation has sharply increased and outstripped real wage growth.
National Minimum Wage increase
The rate of National Minimum Wage pay is varied according to age. Other groups of workers that will also see a 9.7% increase include those aged 16 to 17, 18 to 20 and apprentices. The only group above this with a 10.9% uplift will be workers in the age range of 21 to 22. The Low Pay Commission’s letter confirms their view “that 21- 22 year olds should also be brought into the NLW by 2024”.
The Real Living Wage
The increase in the NLW falls shy of the voluntary real Living Wage (calculated by the Resolution Foundation for the Living Wage Foundation) which has seen its largest increase in history. The l real Living Wage has been raised to £10.90 per hour and £11.95 in London. This increase of 10.1% nationally and 8.1% in London has been brought forward to reflect pressures in the cost of living. Up to 390,000 Living Wage workers who are employed by 11,000 Living Wage employers will benefit from this boost in income. The Real Living Wage calculation is based on a core "basket of goods and services" that people in the UK believe is necessary to meet everyday needs and does not vary according to the age of the worker
The voluntary Real Living Wage rates are required to be implemented by participating employers as soon as possible, but by 14 May 2023 at the latest.
Should you have any queries on any of the topics in this update please contact a member of our Employment Department.
