The national living wage will rise by 6.2% to £8.72 in 2020, the biggest increase since its introduction in April 2016.
The government has estimated that almost three million UK workers will receive increases to their pay as a result of the increase, which will come into effect on 1 April 2020, and will result in an annual rise of £930. The new rates were recommended by the Low Pay Commission, an independent body that advises government on the national living wage and national minimum wage.
This increase forms part of government’s plans for the national living wage to reach 60% of median earnings by 2020. The Chancellor of the Exchequer, Sajid Javid, additionally promised to change the national living wage to accommodate workers aged 23 and above from April 2021, and 21 and over within five years. The government aims to set out more details on the future policy framework in the coming months.
The national minimum wage is also set to increase across all age groups; this will see a 6.5% increase for those aged between 21 and 24, 4.9% for 18 to 20 year-olds, a 4.6% increase for under 18s, and 6.4% for apprentices.
Javid said: “We want to end low pay and put more money in the pockets of hardworking families. This latest rise will mean that since we introduced the national living wage in 2016, the lowest paid will have had a wage increase of more than £3,600.
“We want to do more to level up and tackle the cost of living, which is why the [national living wage] will increase further to £10.50 by 2024 on current forecasts.”
Matthew Fell, chief UK policy director at CBI, added: “Whilst it’s the right thing to do and many workers will feel the benefit, some firms will find this rise challenging in the face of tough economic conditions.
“It’s vital that the Low Pay Commission has the full range of tools at its disposal to judge the evidence base, pace and affordability for any future rises to ensure the UK’s successful job creation story continues into the coming decade.”
Craig Beaumont, director of external affairs and advocacy at FSB, said: “With a national living wage increase of this size now on the horizon, it’s critical that [government] delivers swiftly, particularly with small business confidence plumbing new depths ahead of the election.
“Looking ahead, the independence of the Low Pay Commission must be respected. We can only push on with substantial increases to minimum wage rates if economic conditions allow.”