National Minimum Wage and National Living Wage 2023
Posted on 19th January 2023
The National Minimum Wage (NMW) sets minimum hourly rates of pay for most employees. The rates are set by the government and approved by parliament, based on the recommendations of the Low Pay Commission (LPC).
Last year the LPC’s recommendations were accepted by the Chancellor in the Autumn Statement in November. In April the National Living Wage (NLW) will increase by 9.7% or 92p, so the hourly rate will be £10.42.
The minimum wage rate for 21 to 22 year olds will increase to £10.18, narrowing the gap with the NLW.
NMW rates vary by age and will be:
• £10.42 per hour for adults aged 23 and over (the National Living Wage rate)
• £10.18 for 21 to 22 year olds
• £7.49 for 18 to 20 year olds
• £5.28 for 16 to 17 year olds
• £5.28 for apprentices under 19 or in their first year of an apprenticeship.
How have NMW rates changed?
Since the NMW was first introduced in 1999 the minimum wage rate has increased faster than prices to give those affected a better income in real terms. During the recession of 2008/09 the real value of all minimum wage rates didn’t keep pace, although the rates are now above pre-recession levels.
The government’s target for the MMW was 60% of median earnings by April 2020, which was achieved. The LPC’s role was then revised to put the NMW on a trajectory to apply to two-thirds (66%) of median earnings for employees aged 21 and over by 2024, taking economic conditions into account.
In line with this requirement the LPC recommended that the National Living Wage should apply to employees and apprentices aged 23 and over from April 2021, and by 2024 it will apply to workers aged 21 and over.
How many people are paid at the NMW?
The Low Pay Commission estimates that around 7% of working people in the UK, some 2.5million people, were paid at or below the minimum wage in April 2020. This compares to 1.5million jobs paid at or below the NMW in 2015, before the introduction of the National Living Wage. The Low Pay Commission says that nearly half of all jobs paying at or below the minimum wage are in retail, hospitality, cleaning and maintenance.
The future
The government has asked the Low Pay Commission to monitor developments in the employment market closely, including the impact of increases to the minimum wage rates, and to advise on emerging risks.
The government says it is still committed to the 2024 target, but if the economic evidence warrants it, the Low Pay Commission has been asked to advise the government to review the target or the timeframe.
The argument is that this will help to make sure the lowest-paid people continue to see pay rises without significant risks to their employment prospects.
If you would like help to work out how the latest NMW increases affect your business please get in touch.
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