A Genuine Living Wage?

As part of its Plan to Make Work Pay and protect the lowest earners in UK society, Labour promised to “make sure the minimum wage is a real living wage that people can live on” by changing the Low Pay Commission (LPC) remit.

In a statement on 30 July 2024, Jonathan Reynolds MP, Secretary of State for the Department for Business and Trade, confirmed he had written to Baroness Stroud, the Chair of the LPC, to set out an updated remit.

Updated remit

In a year that marked the 25th anniversary of the creation of the minimum wage in the UK, the LPC has been asked, for the first time, to consider the cost of living and the impact on business, competitiveness, the labour market, and the wider economy.

The LPC is to ensure that the minimum wage rate does not drop below two-thirds of UK median earnings for workers aged 21 and over, which is a recognised measure of low hourly pay.

Removing age bands

The Government also pledged to remove discriminatory age bands and has asked the LPC to recommend a National Minimum Wage that should apply to 18–20-year-olds starting April 2025, which narrows the gap with the National Living Wage.  This is intended to be a first step towards a single-adult rate. 

The Government has also requested that the LPC recommend minimum wage rates for workers above school age but under 18 and those eligible for the apprentice rate, which should increase as much as possible without damaging these groups’ employment prospects.

Measuring effectiveness

It is intended that the LPC will expand its evaluation capabilities and commission research from leading experts to assess the impact of the National Living Wage.

The Government has specifically asked the LPC to gather evidence on:

• Groups of low-paid workers with protected characteristics under the Equality Act 2010.
• The differing impact across the UK of increases to the minimum wage rates to inform how the minimum wage helps deliver greater living standards for working people in all areas of the UK.

Comment

The LPC is expected to make its recommendations to the Government by the end of October 2024, and the new rates will take effect in April 2025.

Whilst it is therefore not possible for employers to fully prepare for any increase in minimum wages now, employers can:

• Conduct an audit of payroll to ensure correct minimum wage compliance at present.
• Review records to ascertain which employees are receiving the minimum wage and, therefore, receiving pay at a potentially lower rate than required from April 2025.

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