Tax_TaxAgility Accountants LondonYesterday Business Secretary Vince Cable announced an above-inflation increase in National Minimum Wage (NMW) rate per hour from £6.31 to £6.50.

Coming into force across the UK on 1 October 2014, the first above-inflation rise (a real-terms cash increase) since 2008 is thought to have had a helping hand from the recommendations and influence of the independent Low Pay Commission (LPC), which earlier this year called upon Mr. Cable to bring in affordable rate rises to help the more than one million lowest-paid workers across the country with their basic, everyday expenses.

New Rates

The new per hour rates differ, as always, depending on your age and whether or not you’re an apprentice. The above-mentioned increase of £6.31 to £6.50 (an increase of three percent) applies to those aged 21 and over, with the following rates applying to other age groups and apprentices:

  • If you’re aged 18 to 20 NMW rises from £5.03 to £5.13 (two percent).
  • If you’re aged 16 to 17 NMW rises from £3.72 to £3.79 (two percent).
  • If you’re an apprentice NMW rises from £2.68 to £2.73 (two percent).

The Government estimates that yesterday’s increased rates will allow the one million lowest-paid workers to earn up to an extra £355.00 over the next twelve months. Speaking on the issue in Parliament yesterday, Mr. Cable said:

The National Minimum Wage provides a vital safety net for the lowest paid, ensuring they get a fair wage whilst not costing jobs. This year’s rise will mean that they will enjoy the biggest cash increase in their take home pay since the banking crisis, benefiting over one million people in total.”

Low Pay Commission (LPC) Influence

Despite the fact that yesterday’s NMW rise, the biggest increase in take home pay since the start of the banking crisis, would appear to be the Government’s preferred headline, it’s clear that the LPC is gaining increased influence in Government, with the Business Secretary having personally asked them to bring forth their recommendations earlier this year.

Mr. Cable stated that he believes it’s vital that the recommendations of the LPC should be viewed above and beyond any political considerations with regard to the setting of the minimum wage.

With this in mind, the LPC have been asked to continue advising the Government on future wage rises, which are typically announced in October of each year, with one of the primary concerns being to look into the level of improvement in economic conditions that would be necessary for the NMW to continue rising ahead of inflation in years going forward.

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This blog is a general summary. It should not replace professional advice tailored to your specific circumstance.