Record increase

Pay rise benefits 200k workers but hits businesses

Wagamama, service, hospitality, restaurant
Thousands of workers will get a pay rise from today (pic: Terry Murden / DB Media Services)

New minimum wage rates will benefit more than 200,000 low paid workers from today but will add to the cost pressures for thousands of hospitality, leisure and retail businesses.

A key change this year is that the national living wage (NLW) eligibility has been extended to workers aged 21-22, as it previously only applied to those aged above 23.

This fulfils the recommendation that the Low Pay Commission has been making since 2019, which is to extend the NLW to these younger groups of workers.

A 9.8% increase in the NLW, from £10.42 per hour to £11.44, equates to more than £1,800 extra per year before tax for someone working full time.

The 2024 National Minimum Wage for 18 to 20 year olds is 62% higher and for apprentices is 94% higher than the 2015 rates.

Businesses in some sectors have called the rises unsustainable. Mike Iddon, chief executive of the Pets at Home retail chain, said the increase would add £16 million to its payroll, when it had originally planned for an £8 million rise.

Alex Baldock, chief executive of Currys, claimed the increase – which comes at the same time as a hike in business rates – amounted to “blithely loading yet more costs on an already overburdened retail sector”, and would lead to fewer jobs.

However, the Low Pay Commission says many employers already pay their employees above the NLW rates, the key reasons being improved staff recruitment and retention, and a desire to make employees feel valued.

UK Business Minister Kevin Hollinrake said: “Today’s announcement is an historic moment, as we end low hourly pay for those on the National Living Wage in the UK.

“Full-time workers on the National Living Wage now earn over £8,600 a year more since its introduction, as we continue to protect people’s income.”

The full increases from today are:

* National Living Wage (21 years and over) up 9.8%, from £10.42 to £11.44

* National Minimum Wage (18-20) up 14.8%, from £7.49 to £8.60

* National Minimum Wage (under 18) up 21.2%, from £5.28 to £6.40

* Apprentice Rate up 21.2% from £5.28 to £6.40

* The Accommodation Offset up 9.8% from £9.10 to £9.99

Also from today the VAT registration threshold is raised from £85,000 to £90,000.

Chancellor Jeremy Hunt announced the change in the Spring Budget. Raising the threshold will take 28,000 businesses out of paying VAT altogether, and ensure the UK has a higher threshold than any EU Member State and joint highest in the Organisation for Economic Co-operation and Development (OECD).

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