National living wage to rise to £7.50

Pound coins stack

Autumn statement 2016: Chancellor Philip Hammond has announced that the national living wage will increase to £7.50 an hour from April 2017.

The national living wage will increase by 4.2%, taking the current minimum level of pay for individuals aged 25 and over from £7.20 an hour to £7.50 an hour.

Other pay increases that will apply from April 2017 include moving the national minimum wage rate for 21- 24 year olds from £6.95 an hour to £7.05 an hour; amending the rate for 18-20 year olds from £5.55 an hour to £5.60 an hour; the rate for 16-17 year olds will change from £4.00 an hour to £4.05 an hour; and the rate for apprentices will move from £3.40 an hour to £3.50 an hour.

The government aims for the national living wage to reach 60% of median earnings by 2020, subject to sustained economic growth.

The changes follow the recommendations of the independent Low Pay Commission.

In addition, the government will invest £4.3 million a year into national minimum wage enforcement, enabling HM Revenue and Customs teams to review employers considered most at risk of non-compliance. The government will also provide extra support for small organisations to aid with compliance, as well as promote an awareness campaign to ensure staff and employers understand their rights and responsibilities.

Jo Causon, chief executive officer at The Institute of Customer Service, said: “An increase in the living wage may bring renewed concerns for British businesses already nervous about their economic performance, but evidence suggests that customers are more attuned to organisations investing in their staff through reward, skills development and wellbeing.”

Guy Stallard, director at KPMG UK, added: “Today’s announcement will see a significant number of workers aged 25 and above get a pay rise of 30p an hour from next April. This may seem like small change to some, but for many people it’ll make a huge difference.

“With the cost of living higher than it’s ever been, the reality for many is that they are forced to live hand to mouth. The increase in the national living wage will go a long way to save swathes of people being caught between the desire to contribute to society and the inability to afford to do so.

“However, it is important that we tackle the issue of low wages for the younger generation too. Low pay blights the prospects of the young. This lack of financial freedom means those finishing school and university cannot fly the nest and gain the independence other generations have enjoyed, despite being in employment. It may not be possible or practical for everyone, but all organisations need to do what they can to address the problem of low pay. Of course, change cannot happen instantly, but making an initial assessment is an important first step.”