Minimum Wage Increase

Minimum Wage Increase

On November 21, 2023, the government announced its acceptance of the Low Pay Commission’s (LPC) recommendation regarding minimum wage rates, effective from April 2024. The LPC, an independent body composed of employers, trade unions, and experts, advises the government on minimum wage matters. The rate recommendations, unanimously agreed upon by the Commission, include significant changes.

Starting April 1, 2024, the National Living Wage age threshold will be reduced to 21, previously applicable to those aged 23 and above. The rate will increase from £10.42 to £11.44 per hour. Additionally, there will be a £1.11 raise in the National Minimum Wage for 18-20 year olds, setting it at £8.60 per hour, and a £1.12 increase in the National Minimum Wage for 16-17 year olds and apprentices, bringing it to £6.40 per hour.

It’s important to distinguish the National Living Wage from the UK Living Wage and the London Living Wage, which are voluntary benchmarks established by the Living Wage Foundation. These benchmarks, not legally binding, serve as measures of need and are optional for employers.

The LPC’s announcement notes that this marks the largest-ever cash increase in the minimum wage and the first time it has risen by more than £1. The substantial increase is attributed to robust pay growth across the economy, a trend expected to persist into the following year.

To prepare for these changes, businesses should review pay rates in March to ensure compliance with the increased National Living Wage and National Minimum Wage in April. Monitoring individuals’ ages is crucial to maintaining compliance as they transition into different age bands or complete their first year of apprenticeship.

It’s essential to note that a worker’s entitled hourly rate of the National Living Wage or National Minimum Wage is based on the rate applicable on the first day of the pay reference period. For example, if an individual is paid monthly on the 15th and there is an increase on April 1, they would receive the old rate up to April 15 and the new rate from April 16 to May 15.