The government has announced that new National Minimum Wage and National Living Wage cycle will change from April 2017 so that both rates are amended in April each year.
Following the introduction of the National Living Wage (NLW) in April 2016, for workers aged 25 and over, many businesses have had to reconsider their employee remuneration policies.
The initial rate of £7.20 is a 50p increase in the rate that applied before but, in terms of detailed rules, the NLW is really just a new category rate for the National Minimum Wage (NMW). However, there is an important difference of principle in the setting of the rates.
In a 368-page annual report, the Low Pay Commission recommended changes to the NMW rates, to apply from 1 October 2016. The recommended rate for 21 to 24 year olds, for example, is £6.95, an increase of 25p.
The Commission will continue to recommend rates for those under 25 and apprentices that won’t be detrimental to their employment prospects. It will also recommend rates for NLW with a focus on the government target of reaching 60% of median earnings by 2020 (on latest forecasts this would be £9 in 2020). The timing will be brought in line so that increases to both rates come into effect at the same time.