National Living Wage and National Minimum Wage rates to increase from April 2021

25 November 2020

As part of the Spending Review 2020, Chancellor of the Exchequer, Rishi Sunak, announced that, as per the Low Pay Commission’s (LPC) recommendations, which were made at the end of October 2020, the National Living Wage (NLW) and National Minimum Wage (NMW) rates will increase from April 1 2021.

The new NLW will be £8.91 per hour, which is an increase of 2.2% from the current rate of £8.72 per hour. This will also be extended so that anyone aged 23 and above will be eligible for this rate of pay, as opposed to how it is currently applied, to those aged 25 and over.

New NMW rates will also apply but for workers aged under 23, there have been smaller increases because there are risks to youth employment due to the current economic situation. In providing the recommendations, commissioners confirmed that they have no reason to believe that the scheduled increases pose any significant additional risk to employment prospects, outside of the already challenging outlook.

Chair of the LPC, Bryan Sanderson, said:

“Recommending minimum wage rates in the midst of an economic crisis coupled with a pandemic is a formidable task. The difficulty in looking forward even to next April is daunting. There are strong arguments concerning both low-paid workers – many performing critically important tasks – and the very real solvency risks to which small businesses are currently exposed. In these unprecedented conditions, stability and competence are prime requirements.

Our value as a social partnership is to use the imperfect economic evidence to produce a recommendation which is professionally researched and dispassionate. Most importantly, after much debate it has the support of the business, trade union and academic representatives who make up the Commission. We have opted for a prudent increase which consolidates the considerable progress of recent years and provides a base from which we can move towards the Government’s target over the next few years.”

The LPC’s recommendations were as follows:

 Due to current economic turbulence and uncertainty over the future, the LPC has not made any recommendations for changes to the Government’s target of ensuring that the NLW increases to two-thirds of median earnings by 2024. The report provides a path for the future of NLW but due to the impact of furloughing, pay data will not be as accurate as in previous years.

The full LPC report will be published early in December 2020 and will provide all of the evidence that was used in making the recommendations for April 2021.

CIPP comment

The CIPP held a virtual thinktank roundtable with the LPC and submitted a response to the consultation that asked what NLW and NMW rates should be for April 2021. We expect to see some of our findings presented in the full report, which will be released in December.

 


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