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State of pay – a look at this year's National Minimum Wage increase

Luke Whitmore - Law on the Web

  1. 01 October 2015
  2. Employment
  3. 0 comments

The National Minimum Wage underwent its annual increase today, rising from £6.50 an hour to £6.70. The 3% increase will mean a pay rise for over 1.4 million workers.

The rates apply to anyone aged 21 or over, with 18-to-20-year-olds entitled to £5.30 an hour and those under 18 getting £3.87. The minimum rate of pay for apprentices has also increased, going from £2.73 to £3.30.

Business Secretary Sajid Javid said: “As a one-nation Government we are making sure that every part of Britain benefits from our growing economy and today more than 1.4 million of Britain's lowest-paid workers will be getting a well-deserved pay rise.

“The increase for apprentices is the largest in history making sure that apprenticeships remain an attractive option for young people, while the National Minimum Wage will see the largest real-terms increase since 2007.”

However, TUC general secretary Frances O’Grady offered a less optimistic outlook, commenting that the increase was “welcome but hardly cause for euphoria”, due to continuing cuts to the welfare budget.

“Giving with one hand and taking more with the other is not the way to make work pay,” she said. “Slashing vital in-work benefits will serve only to push more working households into poverty.

“We won't have a recovery for the many by taking an axe to the welfare budget.”

The wages of low-paid workers have been the subject of increased attention recently, with some large companies making moves to improve the situation. Supermarket chain Sainsbury’s is now paying at least £7.36 an hour to all staff aged over 18 working on the shop floor, and Costa Coffee staff yesterday received a pay increase to £7.40 an hour, or £8.20 for London-based workers.

This comes in advance of another statutory wage increase expected in early 2016. While ordinarily the annual minimum wage increase is the only pay rise most workers will get for a year, from April next year, those aged over 25 will be entitled to the “National Living Wage” instead. This is set to be introduced at £7.20 an hour, and is intended to rise to at least £9 by 2020 (being calculated as 60% of median earnings in the UK).

However, while the government has trumpeted the fairness of this policy, it has met with criticism that this pay level does not meet the actual definition of a “living wage”, which is intended to be tied to the cost of living, not merely to median earnings. The rate set by the Living Wage Foundation is currently set at £9.15 in London and £7.85 in the rest of the country.

The Living Wage Foundation is beginning to see some success in encouraging employers to pay their staff a rate reflective of the cost of living. Furniture chain Ikea announced back in July that they will increase staff pay to the rates recommended by the campaign group from April next year, and there are signs that more big businesses  are set to follow their lead.

Lidl recently became the first supermarket to take on the Living Wage Foundation’s recommendations, actually going further by offering £8.20 per hour. Morrisons is also set to match this rate, though they will not match the suggested London rate of £9.15.

With all this focus on the wages of low-paid workers, it can be hoped that pay conditions will continue to improve through both statutory and voluntary measures.

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