Consultation on the National Minimum Wage rates
30 July 2015
The Government is making major changes to the National Minimum Wage and has asked the LPC to report to it twice in relation to the new arrangements.
Firstly it has asked the Low Pay Commission (LPC) to report on the future level of the existing National Minimum Wage (NMW) rates, by as early as possible in February 2016.
Secondly it has asked the LPC to report on the future level of the new National Living Wage (NLW), which is introduced in April 2016 and applies to workers aged 25 and over. On this, the LPC has been asked to make recommendations by October 2016 for the rate in April 2017.
The Government is asking for views on the existing rates and initial evidence on the potential impact of the National Living Wage.
The Government is also undertaking a review into the NMW cycle, with the intention of aligning the timetable for all NMW changes. Subject to the review, the earliest alignment could happen is April 2017.
Look out for a survey on the changes as the Policy Team will be asking for your views and experiences.
There are currently four National Minimum Wage rates, which change annually for all workers on an October cycle: the adult rate (for those aged 21 and over), the 16-17 Year Old Rate, the Youth Development Rate (for those aged 18-20) and the Apprentice Rate. The main, adult rate, will be £6.70 from October 2015.
The Government is introducing the National Living Wage: a mandatory new rate for all workers aged 25 and above comprised of the adult rate and an initial 50 pence Living Wage Premium. The National Living Wage will apply from April 2016, at a rate of £7.20 an hour. Once introduced this will become the rate for workers aged 25 and over. Only 21-24 year olds will be paid at the adult rate of the National Minimum Wage.
The Government has set out an ambition that the National Living Wage should continue to increase each April to reach 60 per cent of median earnings by 2020, with an objective to have a National Living Wage of over £9 an hour by 2020.
Against this backdrop, the LPC’s remit from the Government asks them to:
- Monitor, evaluate and review the levels of the adult, youth and apprentice rates and, in February 2016, make recommendations on the increase it believes should apply from October 2016.
- By October 2016, provide a recommendation on the level of the National Living Wage which it believes should apply from April 2017.
- For both the existing rates and the new rate provide indicative recommendations for the following year, not just rates for one year.
The consultation will run until 25 September 2015.