Low Pay Commission confirms approach to extended remit
The Low Pay Commission (LPC) advises the Government on the National Living Wage and the National Minimum Wage. A new policy paper sheds light on the potential pay rates that could take effect from April 2025.
Updated remit following election
Following the election, the Government issued a new remit for the LPC. Under the new remit, the LPC is tasked with:
- Considering the cost of living and inflation when making its pay rate recommendations;
- Ensuring its recommended pay rates do not drop below two-thirds of UK median earnings for workers aged 21 and over
- Narrowing the gap between the NMW and the NLW for 18-20 year olds by recommending the highest possible pay rate for this age group. This supports the Government's long-term goal of eliminating the 18-20 year old rate altogether, so one NLW would apply to all adult workers.
Policy paper insights
The LPC's policy paper offers further insights into how it plans to approach its new responsibilities. It emphasizes that a broad range of economic indicators will be used to assess the cost of living and inflation when forming wage recommendations.
Since wages are currently rising faster than inflation, the LPC indicates that the threshold of two-thirds of median earnings will act as a minimum (or 'floor') when determining pay increases.
Additionally, the paper suggests that the NMW for 18 to 20-year-olds could see a more significant percentage increase than the NLW, aligning with the push to close the pay gap between younger and older workers.
Based on current data, the LPC estimates the NLW could rise to £12.10 (a 5.8% increase). However, this is an early estimate, and the final figure may increase further as wage growth trends are monitored throughout the rest of the year.
Next steps
The LPC is expected to submit its formal pay recommendations to the government by the end of October 2024. The revised NMW and NLW rates will come into effect in April 2025.