Key Takeaways
- Minimum wage set to rise to £12.71/hour from April 2025 – a 4.1% increase
- Potential extension to 18-20 year olds could add to business costs
- Separate ‘real living wage’ rises to £13.45/hour for 500,000 workers
UK businesses face another significant wage bill increase as the Low Pay Commission prepares to recommend raising the national minimum wage to approximately £12.71 per hour. This 4.1% hike would outpace current inflation and add to mounting employment costs that have already strained firms across the country.
Minimum Wage Increase Details
The proposed increase from the current £12.21 would take effect in April 2025 and affect about 1.9 million workers aged 21 and over. The Commission will also consider extending this higher rate to 18-20 year olds, who currently earn £10 per hour.
Andrew Goodacre, CEO of the British Independent Retailers Association, emphasized the need for caution: ‘Shop owners want to see a cautious approach. They want to pay their staff fairly but the national living wage has increased by 27 per cent over the past three years – way ahead of inflation.’
Goodacre, who also serves on the Low Pay Commission board, added: ‘Most independent retailers would like to see next year’s increase pegged back to inflation, which is forecast to be falling by next April.’
Business Impact Concerns
The potential wage increase comes as companies continue to recover from last year’s £25 billion hike in employers’ National Insurance Contributions. Combined with upcoming business rate increases, the additional wage costs could significantly impact thousands of firms’ bottom lines.
The Commission’s mandate requires ensuring the minimum wage doesn’t fall below two-thirds of average earnings. Previous projections indicated a range between £12.55 and £12.86 per hour for the new rate.
Voluntary Living Wage Increase
Separately, nearly 500,000 workers will receive a 6.7% pay rise through the voluntary ‘real living wage’ scheme. This rate, adopted by 16,000 companies including Nationwide, KPMG and Aviva, will increase to £13.45 per hour (£14.40 in London).
Employers have until May 2025 to implement this increase, which is calculated based on essential living costs rather than government targets.
