Government reforms (3):  Increase in national living and minimum wage

1. National Living and Minimum Wage: From 6 April 2021, the new hourly rates recommended by the Low Pay Commission (LPC) and accepted by the Government will be as set out below.

The National Living Wage, which currently only applies to workers aged 25 or over, will increase by 2.2% and will be extended to 23 and 24-year-olds for the first time.

• Age 23 plus: National Living Wage increase from £8.72 to £8.91 per hour;
• Age 21 to 22 (inclusive): increase from £8.20 to £8.36 per hour;
• Age 18 to 20 (inclusive): increase from £6.45 to £6.56 per hour;
• Age 16 to 17 (inclusive): increase from £4.55 to £4.62 per hour;
• Apprentice rate: increase from £4.15 to £4.30 per hour.

The Government has confirmed that it followed the recommendations of the LPC in full when setting the rates – with the LPC freely admitting that making those recommendations “in the midst of an economic crisis coupled with a pandemic [was] a formidable task” and that “there are strong arguments concerning both low-paid workers – many performing critically important tasks – and the very real solvency risks to which small businesses are currently exposed“.  See the LPC’s press release (available here).

2. Real Living Wage: From 9 November 2020, the Real Living Wage has risen to £9.50 an hour across the UK and to £10.85 per hour in London.

The Real Living Wage is an hourly rate of pay calculated by the Living Wage Foundation charity (see here) and is based on what people need to live on. It’s paid voluntarily by almost 7,000 UK employers but is separate to the National Living Wage, which is a legal minimum rate set by the Government.   Although the new Real Living Wage rates are effective from 9 November 2020, employers who have voluntarily signed up to be a “Real Living Wage employer” will have until May 2021 to bring in the pay rises.

This increase has been implemented as a means of helping families through the pandemic, with over 800 more employers joining the Living Wage Foundation since the start of lockdown.