Government requests recommendations for National Living Wage and National Minimum Wage rates applicable from April 2021
12 March 2020
The government has published a new remit for the Low Pay Commission (LPC), and requests that it makes recommendations for the National Living Wage (NLW) and National Minimum Wage (NMW) rates that should take effect from April 2021.
The government has asked that the LPC return their recommendations by no later than October 2020, and has outlined the key areas for consideration when recommending the NLW and NMW rates for 2021.
The government has previously accepted the LPC’s recommendations in full, and on 1 April 2020, NLW for those aged 25 and above will increase by 6.2% to £8.72 per hour, which meets the government’s previous aim of reaching a NLW of 60% of median earnings by 2020. The objective is to extend NLW to apply to workers aged 23 and over from April 2021 and then to further its reach to encompass all workers aged 21 and over by no later than April 2024.
In the document, published by the Department for Business, Energy and Industrial Strategy (BEIS), it states that the government aims to make the UK to best place possible in which to live and work. The document asks that the LPC continues to monitor and evaluate the NLW, and to recommend the rate which should be utilised from April 2021, in order to reach two-thirds of median earnings by 2024. The LPC will need to monitor the labour market closely and the impacts of the NLW, in order to advise on any associated risks, so that the government can review its target or its timeframe, or both. This will ensure that the lowest paid workers continue to receive the pay rises they deserve without it having a detrimental effect on their employment prospects. The government notes that the LPC will continue to commission minimum wage policy evaluations from expert researchers, and the government asks that it sets out its evidence strategy for ongoing monitoring and evaluation of the impact of the NLW increase towards the two-thirds median target.
The government has also asked that the LPC monitors and evaluates all the other NMW brackets, e.g. the rates for under 18s, for those aged 18-20, for individuals aged between 21 and 22, and finally, the apprentice rate, and to advise on the rates that should be paid to these groups from April 2021. The government asks that the rates are set as high as possible, without having negative effects on the employment prospects of each group.
The LPC has also been tasked with recommending the accommodation offset rate applicable from April 2021, and in doing so, the government has stated that it should consider the state of the economy, employment levels and relevant policy change.
Within the document, there is confirmation that the LPC intends to review whether or not the apprentice rate remains fit for purpose, as the government wants to ensure that the rate protects people from exploitation, but without damaging the apprenticeship opportunities available.
In response to the announcement by Chancellor, Rishi Sunak, that the LPC would be asked to make recommendations on the future of the NLW, the Chair of the LPC, Bryan Sanderson, said:
“We welcome the confirmation of our 2020 remit in today’s Budget. The target for the National Living Wage to reach two-thirds of median earnings by 2024 is an ambitious one. We will need to listen closely to what employers and workers are telling us, and to very carefully assess the economic evidence in making our recommendations. The current concerns around the coronavirus only reinforce the importance of taking economic conditions into account.
We will be launching our written consultation in the coming days, to start the process of making recommendations on the 2021 minimum wage rates.”
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