Government releases new minimum wage figures for April 2020

02 January 2020

The national living wage is set to increase by 6.2% from the turn of the new tax year, which will mean that employees aged 25 and over will receive £8.72 per hour, as opposed to the current rate of £8.21. The rate is more than quadruple that of inflation and the government has called it “the biggest cash increase ever”.

The comprehensive list of rates is laid out below, with workers in all age brackets eligible for an increase to the minimum amount that they can expect to be paid per hour:

  • The National Living Wage for ages 25 and above - up 6.2% to £8.72
  • The National Minimum Wage for 21 to 24-year-olds - up 6.5% to £8.20
  • For 18 to 20-year-olds - up 4.9% to £6.45
  • For under-18s - up 4.6% to £4.55
  • For apprentices - up 6.4% to £4.15

The Prime Minister, Boris Johnson, said:

“For too long, people haven’t seen the pay rises they deserve.”

 Many businesses have expressed their concern at the new rates, and the fact that they have increased at such a substantial rate over that of inflation. There are calls for the government to cut operational costs for companies in other areas to avoid placing them in situations of financial pressure. The BBC reported that Hannah Essex, co-executive director of the British Chambers of Commerce, commented that many companies “have struggled with increased costs in a time of great economic uncertainty.” She went on to say:

"Raising wage floors so far above the rate of inflation will pile further pressure on cash flow and eat into training and investment budgets.

 For this policy to be sustainable, government must offset these costs by reducing others."

 The Federation of Small Businesses (FSB) echoed this sentiment and warned that the increase to the minimum wage could lead to lower recruitment rates, increased redundancies and the shelving of investment plans. Craig Beaumont, the organisation’s directors of external affairs and advocacy, commented:

"There's always a danger of being self-defeating in this space. Wage increases aren't much good to workers if prices rise, jobs are lost and there's no impact on productivity because employers are forced to cut back on investing in tech, training and equipment."

 Mr. Beaumont also referred to the 1.7% increase in business rates that will come into effect from April 2020, which he said could, combined with the increase to the minimum wage, have a substantial effect on businesses, particularly those that are smaller in size.

An independent report , conducted by Professor Arindrajit Drube, which investigated the impacts of minimum wages around the globe and how this could translate to UK policy should work to allay some of the fears prompted by the increases to minimum wage rates, as it found that there was little to no evidence of job losses as a result of rising minimum wage levels. He welcomed the prospect of “exploring a more ambitious national living wage” but asserted that the Low Pay Commission should have the power to review the effect of pay increases in relation to jobs, so that any uplifts that start having detrimental effects can be reconsidered.

The Low Pay Commission recommended that workers aged 21 and over should be entitled to the national living wage. It is the government’s intention that this will be achieved by 2024, in line with when the national living wage will be set at £10.50 per hour.

 Frances O’Grady, general secretary of the Trades Union Congress, has argued that workers need a national living wage above £10 per hour now and not four years in the future. She stated:

"This is a long-planned raise, but it's also long overdue. Workers are still not getting a fair share of the wealth they create. And in-work poverty is soaring as millions of families struggle to make ends meet,"

 There is a separate, non-mandatory wage level, calculated by The Living Wage Foundation, which it describes as a fair level of pay, and a figure that is a true reflection of the cost of living. This is currently set at £9.30, with a higher amount of £10.75 for employees based in London. Approximately 6,000 UK businesses pay this “real living wage” and are accredited Living Wage employers.

CIPP comment

 Paying the National Minimum Wage and National Living Wage is a legal requirement for businesses, and it is crucial that employers and payroll departments are getting it right. The CIPP recognises this and offers a comprehensive day long course which explores what the rates are, who they apply to and also looks at the payments and deductions to include and exclude from calculations, to ensure compliance. The next course takes place on 22 January 2020 in Manchester and you can enrol here.

 


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