National Minimum Wage Increase

The Government has confirmed that the National Minimum Wage (NMW) will rise by 3% with effect from 1 October 2014, in line with the recommendations of the Low Pay Commission (LPC).

The rise in the main adult rate from £6.31 to £6.50 an hour represents the first above inflation increase of the NMW in six years.

Meanwhile, the NMW rate for 18-20 year olds will increase by 10p to £5.13, while the rate for those aged 16-17 will rise by 7p to £3.79. The NMW rate for apprentices will see an increase of 5p, bringing the rate to £2.73 an hour.

Commenting on the announcement, David Norgrove, Chair of the LPC said, 'We believe that the economic recovery should allow an increase in the real value of the minimum wage. Our recommendation that the adult minimum wage should increase by 3% to £6.50 an hour is likely to increase its real value for the first time for at least five years'.

'At the same time it takes account of the pressure the minimum wage places on businesses particularly in the low-paying sectors and small firms.'

The LPC expects to recommend further progressive increases to the NMW as the economic improvement continues.

Business groups have broadly welcomed the news, with the British Chambers of Commerce describing the new rates as a 'reasonable compromise'.

Phil Orford of the Forum of Private Business said, 'In the context of many rising costs for business, it was important that wages do not become an overbearing burden as businesses seek to invest and grow in the current, improved economic climate'.

However, some trade unions have criticised the Government for not announcing a more dramatic increase, emphasising the fact that earlier this year the Chancellor had lent support to the prospect of introducing a NMW worth £7 an hour by October 2015, which would now require an increase of more than 7% next year.

Under new rules that came into force in February, the maximum penalties levied for firms that fail to comply with NMW regulations have increased. For each underpaid worker, the firm must now pay £20,000, up from £5,000, plus a financial penalty of 100% of the missing wages rather than the previous 50%.

Read more HERE