The government approves National Minimum Wage rise to £6.50 per hour
12 March 2014
The government has approved a rise in the National Minimum Wage to £6.50 per hour from 1 October 2014 with more than 1 million people set to see their pay rise by as much as £355 a year.
The rise will take effect in October 2014, as Business Secretary Vince Cable has accepted in full the independent Low Pay Commission’s recommendations for 2014, including plans for bigger increases in future than in recent years.
The Low Pay Commission (LPC) has said the rise, the first real terms cash increase since 2008, is manageable for employers and will support full employment.
The National Minimum Wage rates from 1 October 2014, as recommended by the LPC, will be:
- a 19p (3%) increase in the adult rate (from £6.31 to £6.50 per hour)
- a 10p (2%) increase in the rate for 18 to 20 year olds (from £5.03 to £5.13 per hour)
- a 7p (2%) increase in the rate for 16 to 17 year olds (from £3.72 to £3.79 per hour)
- a 5p (2%) increase in the rate for apprentices (from £2.68 to £2.73 per hour).
Business Secretary Vince Cable said:
“The recommendations I have accepted today (12 March 2014) mean that low paid workers will enjoy the biggest cash increase in their take home pay since 2008. This will benefit over 1 million workers on National Minimum Wage and marks the start of a welcome new phase in minimum wage policy.
The independent Low Pay Commission plays a crucial role in advising the government about the minimum wage. This is why I asked them to look at how we could restore the real value of the National Minimum Wage as the economy recovers.
The LPC’s new forward guidance gives us a much better understanding of how an economic recovery can be translated into faster and significant increases in the National Minimum Wage for low paid workers, without costing jobs.
The experts will continue to advise government on future wage rises to help the low paid, and in the meantime I urge businesses to consider how all their staff - not just those on the minimum wage - can enjoy the benefits of recovery.”
The CIPP ran an online voting poll in respect of National Minimum Wage rise proposals via its LinkedIn group. Interestingly the majority who responded from the payroll profession believed the 3% proposed rise was in fact too low (53%) with only 15% saying it was too high. 30% believed it was just right, so the 3% only applying to the highest rate and the rest receiving just a 2% rise is a disappointing announcement. It is always difficult when assessing how much a statutory right should increase by as the big picture comes into play; the economy, political incentives with an election just round the corner and of course the employer, especially the SME. The CIPP is pleased however, that we know the rates much earlier than usual, so there is something to be said for a politically driven piece of legislation after all!