National Minimum Wage Increase 2016
National Minimum Wage Increase From 1st October 2016
The government have announced a national minimum wage increase 2016 for 21 to 24-year-olds by 3.7% to £6.95 per hour from 1st October 2016, after the Government accepted recommendations for the new rates from the Low Pay Commission (LPC).
Workers aged between 18 and 20 will see their pay rates rise by 4.7% to £5.55 per hour. The minimum wage for 16 to 17 year-olds increases to £4 per hour, a hike of 3.4%, while the apprentice rate increases 3% to £3.40.
The Government, which announced the new rates alongside its new Help to Save initiative, said the increase will mean that, for the first time, the national minimum wage for 21- to 24-year-olds is restored to its highest level in real terms, above its previous peak before the recession.
The national living wage, the minimum wage rate for workers aged 25 and over, is also introduced on 1 April 2016.
LPC chair David Norgrove explained that the unemployment rate for 21 to 24 year-olds is twice as high as 25 to 30 year-olds but that former age group had seen falling unemployment rates and pay growth twice as fast as for workers aged 25 and above.
“Our recommended increase balanced these considerations, delivering a higher increase than last year in both cash and percentage terms. It means both the real and relative value of the minimum wage for 21 to 24 year-olds is likely to reach its highest ever level,” he said.
The challenge for employers is keeping pace on pay, whilst juggling a number of other employment related costs coming their way. It is becoming increasingly difficult to disentangle rises to the national minimum wage rates with other business costs such as the new apprenticeship levy, pensions auto-enrolment and the proposed immigration skills charge.
The minimum wage rates will last for six months only after Government concluded that the rates for all workers should be aligned in April next year. The LPC will report in the Autumn on the level of all the rates to apply in April 2017 including the national living wage and new rates for the four minimum wage rates.
The Government’s intention to uprate the national living wage and the national minimum wage rates at the same time from next year clearly makes sense.