National Minimum Wage: What is it?
Lucy Richards, 18th January 2022
- Rishi Sunak: “Wages are rising and that is a good thing – that’s a positive thing – we want to see that”.
- Campaigning group Youth Fight for Jobs took to Leeds on 9 October 2021 called on the Government to raise the minimum wage or face millions of young people being plunged into poverty.
- In November, Rishi Sunak announced that the national living wage would rise to £9.50 an hour.
What is the minimum wage?
The National Minimum Wage Act was passed in 1998 by the Labour government and came into force the following year. The aim of the act is to set out the least a worker can be paid per hour by law.
It started at £3.60 for those 22 and older, and £3.00 for 18-21 year olds.
There are no two types of minimum wage, as follows:
- National Living Wage: applies to workers over the age of 23
- National Minimum Wage: applies to workers aged 22 and under.
The minimum wage has increased every April since it was introduced.
How much is the minimum wage?
The hourly rate for the minimum wage depends on the workers age and whether they are an apprentice.
Current rates for 2021:
- 23 and over: £8.91 an hour
- 21 to 22: £8.36 an hour
- 18 to 20: £6.56 an hour
- Under 18: £4.62 an hour
- Apprentice: £4.30 an hour
It is important to note that apprentices are entitled to the apprentice rate if they are either:
- Aged under 19; or
- Aged 19 or over and in the first year of their apprenticeship. After they have completed their first year of the apprenticeship they will be entitled to minimum wage (this applies to apprentices aged 29 or over only).
If you think you should be getting the minimum wage and aren’t, you can complain via the HMRC website.
When and how is the minimum wage changing?
The minimum wage increases will take effect from 1 April 2022:
- 23 and over: £9.50 an hour
- 21 to 22: £9.18 an hour
- 18 to 20: £6.83 an hour
- Under 18: £4.81 an hour
- Apprentice: £4.81 an hour (the same applies as above with regard to apprentice rates).
The rise means a full-time worker will get £1,074 extra a year before tax.
What is the ‘Real Living Wage’?
Over 7,000 businesses have signed up to pay the wage rates set by the foundation. The 2021 rates are £10.85 an hour in London and £9.50 elsewhere.
The real Living Wage is set by the Living Wage Foundation who campaign to ensure staff are paid a wage that meets their everyday needs. The purpose is to reflect what employees should be getting to take into account the actual living costs of workers.
The movement is still going and the aim is to have everyone being paid the Real Living Wage as a minimum.
Who sets the minimum wage?
The minimum wage is set by the government each year and based on the recommendations of the independent advisory group called the Low Pay Commission.
It bases its recommendations on the state of the economy, and considers how many people are in work, what’s happening to everyone’s earnings and how much they are having to pay for essentials.
The Commission usually publishes its recommendations in November to take effect in the following April. But there are questions as to whether it has kept up with the increased cost of living.
Youth Fight for Jobs campaigner, Alex Hutchinson, believes that youth unemployment is only going to get worse now that the furlough scheme has come to an end. Mr Hutchinson also stated that “an immediate increase of minimum wage to £12 an hour” is needed to “lift millions of workers out of poverty, or on the brink of poverty”.
Government statistics show that young workers have been hit the hardest over the last 18 months, almost 80% of jobs lost in the past year have been in the under 35 age group.
Chancellor Rishi Sunak said the rise “ensures we’re making work pay and keeps us on track to meet our targets to end low pay by the end of this Parliament”.
However, Labour shadow chief secretary to the Treasury, Bridget Phillipson, described it as an “underwhelming offer” that would be mostly swallowed up by tax rises, universal credit cuts and higher energy bills.
If you have any questions regarding the NMW or Real Living Wage, please do not hesitate to get in contact.