Low Pay Commission confirms approach to updated remit on recommending increases to NLW and NMW and increases taking effect from 1 April 2025.
On 5 September 2024, the Low Pay Commission (LPC) published a policy paper confirming how it intends to tackle its updated remit in relation to advising the government on the national living wage (NLW) and national minimum wage (NMW). The LPC is an independent statutory body set up to monitor and evaluate the NMW and make recommendations for change.
The current NLW for those aged 21 and over is £11.44 per hour, and the current NMW for those aged 18 to 20 is £8.60 per hour and for those under 18 and apprentices it is £6.40 per hour. It has now been announced that with effect from 1 April 2025, the NLW will increase to £12.21 per hour, and the NMW for those aged 18 to 20 will increase to £10 per hour. The new NMW for those under 18 and apprentices will be £7.55.
The accommodation offset will also rise to £10.66 per day.
The Labour government updated the LPC’s remit on 30 July 2024 to encompass certain commitments made in its Plan to Make Work Pay. Among other things, it instructed the LPC to recommend:
- An increased NLW rate to apply from April 2025 which, for the first time, should take into account the cost of living.
- A NMW rate for 18 to 20-year-olds to apply from April 2025 which should narrow the gap with the NLW. This will be a step towards achieving the government’s ultimate aim of having a single adult rate.
Both of these recommendations have been reflected in the new NLW and NMW figures for April 2025, and mean that 3.5 million workers will receive a pay rise this year.
In relation to the NLW, the policy paper confirms that the LPC will treat the instruction to take into account the cost of living as the “floor” to its recommendations, alongside the instructions to consider inflation up to March 2026 and to avoid falling below two-thirds of median earnings. As the new remit emphasises the importance of boosting low earnings, there may be scope to recommend increases above the floor if this is supported by economic evidence. The LPC will only recommend an increase below the floor if this is necessary to avoid negative outcomes, such as significant job losses among low-paid workers.
When looking at the NMW, the LPC took into consideration the government’s ambition to abolish the 18 to 20-year-old rate. However, it observes that the government intends to achieve this slowly, taking steps “year by year”. For 2025, the LPC’s aim is to “further reduce the gap” between the 18 to 20-year-old rate and the NLW, rather than to eliminate it.
With the cost of living being on the forefront of everyone’s minds, it is important for employers to be aware that if employees believe they are not being paid the NMW, they have the right to inspect, examine and copy company pay records. The sanction for non-compliance is 80 times the hourly NMW in force.
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