Low Pay Commission statement on its updated remit
Policy Paper: How we’ll respond to our updated remit - GOV.UK (www.gov.uk)
The Low Pay Commission (LPC) is an independent public body that advises the Government each year on the National Minimum Wage (NMW) and National Living Wage (NLW). On 30 July 2024, the Government issued a new remit for the Low Pay Commission, which applies to the rates that take effect from April 2025.
Summary of the remit
The NLW increase in 2025 should take account of the cost of living and expected inflation up to March 2026 and not fall below two-thirds of median hourly earnings. These act as a ‘floor’ to our recommendations.
The remit also says how important it is to “boost low earnings”. So, there is scope to recommend increases above the ‘floor’ if the economic evidence supports this, i.e. taking into account the impacts on business, competitiveness, the economy and wider labour market.
The Government’s ambition is to abolish the 18–20 Year Old Rate so the NLW applies to those aged 18 and above. The remit says we should achieve this by “taking steps year by year”, so “in the interim” our aim for 2025 is to further reduce the gap between the 18-20 rate and the NLW.
1.2 National Living Wage (NLW)
Remit Purpose: Ensure NLW provides a fair wage for the lowest-paid workers while considering economic factors, including cost of living and inflation trends.
NLW Should Not Fall Below: Two-thirds of median hourly earnings.
Current Estimate: £12.10 (5.8% increase), with a projected range of £11.82 to £12.39.
Estimates are rising due to stronger-than-expected wage growth in 2024.
Real Terms Rise for Lowest-Paid: Likely if wage growth continues to outpace inflation. The two-thirds bite acts as a ‘floor’ for recommendations.
Potential Lower NLW: Only recommended if necessary to prevent negative impacts like job losses, but increases above the ‘floor’ are possible to boost low earnings.
1.3 Youth Rates and Apprentices
Government Aim: Gradually narrow the gap between the 18-20 Year Old Rate and the NLW by 2025.
Largest-ever increase for this age group in April 2024; future increases will likely be larger for the 18-20 Year Old Rate.
16-17 Year Olds and Apprentices: Rates will continue to be set to avoid harming employment prospects.
1.4 Next Steps
LPC Evidence Gathering: Recommendations will be submitted by October 2024, with final NLW estimates based on the Annual Survey of Hours and Earnings (ASHE).
Implementation: Recommendations, if accepted, will take effect in April 2025.