THE UK government has announced a 6.2 per cent increase in the National Living Wage (NLW), set to take effect on April 1, 2020.
The rise will see the NLW increasing from £8.21 to £8.72 for over 25 years olds, to meet the government’s current target of reaching 60 per cent of median earnings by 2020.
The new rate will lead to annual pay rise of up to £930 for a full-time worker, resulting in what the government described as the ‘biggest cash increase ever’ on the National Living Wage.
Prime minister Boris Johnson said: “Hard work should always pay, but for too long, people haven’t seen the pay rises they deserve”.
“Our government will put a stop to that, giving nearly three million people from Edinburgh to Eastbourne a well-earned pay rise, including the biggest ever cash boost to the National Living Wage.”
Younger workers who receive the National Minimum Wage (NMW) will also see their pay boosted with increases of between 4.6 per cent and 6.5 per cent, dependant on their age, with 21-24-year-olds seeing a 6.5 per cent increase from £7.70 to £8.20 an hour.
Chancellor Sajid Javid said: “We want to end low pay and put more money in the pockets of hard-working families. This latest rise will mean that since we introduced the National Living Wage in 2016, the lowest paid will have had a wage increase of more than £3,600”.
He added that the government is on course to increase the NLW further to £10.50 by 2024 on current forecasts to end low lay.
In September Javid had pledged to increase the NLW towards a new target of two-thirds of median earnings by 2024.
He has also announced his plans to expand the reach of the NLW to cover workers aged 23 and over from April 2021, and to those aged 21 and over within five years.
The latest increase follows the recommendations by the Low Pay Commission, which the government has fully accepted.
Bryan Sanderson, Chair of the Low Pay Commission said: “Our recommendations on the NLW are conditioned on sustained economic growth, and this bar was more narrowly reached than in previous years. Nevertheless, the economy has continued to grow and the labour market has performed well overall.
“The Chancellor’s intentions for the next phase of the NLW will mean further ambitious increases. We will continue to keep a close eye on the evidence and to report to the Government on the challenges this involves.”
Responding to the increase in the NLW and NMW, the Association of Convenience Stores has warned that the ‘significant hikes’ will put further pressure on struggling high street businesses.
James Lowman, chief executive of the ACS said: “The fact is that rising wage costs are the biggest single factor among many issues impacting all types of retailers, and there is a tension between the desire to raise wages for the lowest paid and the need for viable shops and vibrant high streets
“This increase in minimum wage rates – which is four times the rate of inflation – will have an impact on investment, reduce staff hours for many employees working in the sector, and force retailers to work even more hours in the business themselves to make up the shortfall.”