National living wage likely to rise by 5.7%

Move to increase 18-20 year old rate of national minimum wage will begin from 2025 but will not be instant.

The Low Pay Commission has set out an interim plan for 2025 to start to increase the young persons’ rate of £8.60 in line with government remit to remove the current variation in rates dependent on age.

This is in line with the government’s objective to remove the gap between the 18-20 rate and the national living wage (NLW).

Businesses should also be prepared for another significant increase in the main national living wage rate with a possible rise of 5.7% based on early projections from the current rate of £11.44 per hour to £12.10.

In terms of the 2024-25 national living wage rate for anyone aged over 21 years old, the Commission said that it was projecting a range around our central estimate which runs from £11.82 to £12.39, with £12.10 the likeliest rate taking into account strong wage growth.

In order to narrow the gap from April 2025, there will be larger increases for the 18-20 Year Old Rate, currently set at £8.60, than for the NLW.

‘If current trends in prices and wages continue then the increase needed to maintain the two-thirds bite will exceed that required to keep pace with expected inflation,’ the Low Pay Commission said. ‘Effectively, as economic conditions stand today, this makes the two-thirds bite a ‘floor’ to our recommendations.’

The Low Pay Commission will continue gathering evidence until it is due to submit its recommendations to the government by the end of October 2024. This includes a wide range of evidence to assess the impacts on business, competitiveness, the labour market and the wider economy.

Changes in rates will come into force from April 2025.

Stakeholders can respond to the Low Pay Commission discussions via email.

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