Yahoo News What does the minimum wage increase mean for you?
More than three million workers will receive a pay rise next year after the government confirmed a boost to the National Living Wage
The national living wage will rise from April, boosting the pay of millions of workers, the chancellor has confirmed.
Delivering her first budget, Rachel Reeves confirmed a 6.7% rise to the base pay rate, telling MPs it will be worth £1,400 a year for an eligible full-time worker over the age of 21.
She said it was a "Labour policy to protect working people, being delivered by a Labour government once again".
"I know that for working people up and down our country, family finances are stretched and pay checks don’t go as far as they used to," Reeves told the Commons.
"For the first time, we will move towards a single adult rate, phased in over time, by initially increasing the National Minimum Wage for 18-20 year olds by 16.3% as recommended by the Low Pay Commission, taking it to £10 an hour."
The 16% rise in the national minimum wage is the largest increase in the rate on record.
What is the minimum wage and who is eligible?
The minimum wage is the minimum hourly rate employees must receive for their services.
There are two versions of it: the national minimum wage, for people of school leaving age (which is broken down into separate amounts for 18-20-year olds, under-18s and apprentices); and the national living wage, for those aged 21 and over.
Every worker is entitled to it, whether they are full-time, part-time, casual labourers, agency workers or apprentices.
How much is it and how much will it rise to?
According to the Treasury, around 3 million workers will directly benefit from an increase in the national living wage from £11.44 an hour to £12.21.
The national minimum wage for 18-20-year-olds is to rise from £8.60 to £10.00 an hour, with an expected 200,000 workers being impacted.
The rate for under 18s and apprentices (around 130,000 young people) will go up from £6.40 to £7.55 an hour.
The increase follows the government’s recent instruction to the Low Pay Commission, which recommends minimum wage rates, to include the cost of living in its calculations. Last month, the LPC said it expected a 5.8% increase, but the government has exceeded that with its announcement today.
However, the rise still falls short of the 'real living wage' called for by the Living Wage Foundation, which has campaigned for a pay rate of £13.85 per hour in London and £12.60 per hour for the rest of the country.
The LPC also warned that some businesses were beginning to struggle with increases in the minimum wage, which has risen faster than inflation over recent years.
Baroness Philippa Stroud, chairwoman of the Low Pay Commission, said: "Employers have had to deal with the adult rate rising over 20% in two years, and the challenges that has created alongside other pressures to their cost base.”
She added: “The data show some signs of employers finding it harder to adapt to minimum wage increases.”
This was echoed by John Foster, chief policy and campaigns officer at the Confederation of British Industry (CBI), who said while the national living wage was a “valuable tool” for protecting incomes, it also posed challenges for struggling firms.
He added: “That pressure will make it increasingly difficult for firms to find the headroom to invest in the tech and innovation needed to boost productivity and deliver sustainable increases in wages.”
‘Most successful economic policy in a generation’
The minimum wage was introduced by Tony Blair's government in 1999.
Twenty-five years on, it has been hailed by the Resolution Foundation think tank as the "single most successful economic policy in a generation".
It said: "Between 1980 and 1998, hourly pay growth in the UK was twice as fast for the highest earners as it was for the lowest earners (3.1% versus 1.4% per year).
"But since 1999 - when the minimum wage was brought in - this trend has reversed, and hourly pay inequality has fallen with pay growth for the lowest earners five times that seen by the highest earners (1.6% versus 0.3% per year)."
It said this pay growth for Britain’s lowest earners "is equivalent to them earning £6,000 more per year, compared to if their earnings had simply continued to grow in line with typical wages since 1999".
What can I do if I'm not being paid enough?
In February 2024, the government revealed that more than 500 firms had been found to not paying the minimum wage, with employers ordered to repay workers nearly £16 million.
If you are not being paid the national living wage or national minimum wage, consumer organisation Citizens Advice recommends first having an "informal chat" with your employer.
The government has a pay calculator service to help with such discussions.
If your employer agrees it has made a mistake, arrangements should be made immediately to pay you what you are owed.
This should not be paid in kind with other benefits such as free meals or a greater share of tips or gratuities.
If you still have issues, you can get help from Citizens Advice, or via Acas, the arbitration service.
Who is entitled to the minimum wage?
According to the government, "workers" must be at least school leaving age to get the national minimum wage. They must be 21 or over to get the national living wage.
Workers are also entitled to the correct minimum wage if they're:
part-time
casual labourers, for example someone hired for one day
agency workers
workers and homeworkers paid by the number of items they make
apprentices
trainees, workers on probation
disabled workers
agricultural workers
foreign workers
seafarers
offshore workers
non-family members living in the employer's home who share in the work and leisure activities and are treated as one of the family, for example au pairs
Apprentices are entitled to the apprentice rate if they're either under 19 or 19 or over and in the first year of their apprenticeship
Examples of those not entitled to the minim wage include:
self-employed people running their own business
company directors
people who are volunteers or voluntary workers
workers on a government employment programme, such as the Work Programme
members of the armed forces
family members of the employer living in the employer's home
workers younger than school leaving age (usually 16)
higher and further education students on work experience or a work placement up to one year
people shadowing others at work
workers on government pre-apprenticeships schemes
people on the following European Union (EU) programmes: Leonardo da Vinci, Erasmus+, Comenius
people working on a Jobcentre Plus Work trial for up to 6 weeks
share fishermen
prisoners
people living and working in a religious community
