5th August 2024
Azets Update: National Minimum Wage rates to factor in cost of living from April 2025
As part of the Government’s commitment to ‘making work pay’, it stated it was going to update the remit provided to the Low Pay Commission (LPC) to include cost of living going forward. Following a statement from Jonathan Reynolds, the Secretary for Department for Business of Trade, on 30 July 2024, this has now formally been put in place.
‘Making work pay’ was a significant part of the election campaign trail, with a move towards a real living wage and the creation of a single National Minimum Wage (NMW) rate applying to all workers regardless of age being regular discussion points.
To help achieve the election pledge, emphasis is made on the NMW 18-20 age rate being set higher, so that there is less of a gap between this rate and the National Living wage (NLW) that applies to individuals aged 21 and over.
For the NMW rates applicable to individuals aged under 18 and the apprenticeship rate, the Government also wishes for these to be increased as far as possible, but without damaging the potential employment prospects of these workers.
What does this announcement mean?
The LPC puts National Minimum Wage recommendations to the Government each October, so we will see a change when it comes to these later this year. Following the recommendations, the Government then sets the rates to be effective from the next April (April 2025 in the case).
As cost of living gets formally taken into account, this will likely lead to a larger increase in NMW rates from April 2025 than we have seen previously and will place further cost and budget pressure on employers. This is also likely to place further restrictions on maintaining grade/pay structures, e.g. for increased responsibility and experience.
We await further updates on proposed amendments to the apprenticeship levy funding regime and whether greater access to this scheme could relieve some of the additional cost pressures employers are likely to face with an increase in rates for workers aged 18-20.
National Minimum Wage enforcement
With this change in annual NMW rates in mind, we continue to see increased HMRC enforcement of the NMW across all regions and sectors. HMRC has now visited 11 locations as part of their geographic compliance approach and we anticipate a 12th location will be announced in the near future. Now more than ever it is key for employers to take proactive steps to enhance working time/overtime/expense policies and governing payroll controls to mitigate the risk of 200% penalties and public naming and shaming.
We are here to help
If you have any questions on National Minimum Wage and how to ensure you are being compliant, please get in touch with Azets.
Lyn Newbury
