National minimum wage to rise to £6.50 an hour

The government announced on 22 March 2014 that it has accepted the Low Pay Commission’s (LPC) 2014 recommendations in full and will increase the national minimum wage (NMW) to £6.50 an hour in October 2014. This marks the first time in six years that the minimum wage rate increase (3 per cent) will be higher than the rate of inflation (1.9 per cent).

Business Secretary Vince Cable stated that the new minimum wage will benefit over 1 million workers and be the biggest cash increase in take-home pay since 2008. Affected workers may see their pay rise by as much as £355 a year. He also welcomed the LPC’s assessment that 2014 will mark the
start of a phase of larger increases, provided economic conditions such as stable employment numbers and expectations of sustained economic growth continue to improve.

How NMW is calculated

The LPC is an independent statutory body created by the National Minimum Wage Act 1998 to advise the government on NMW rates. Each February, the LPC submits a report to the government with recommendations for the future levels of minimum wages and related matters.

Creating this report involves conducting extensive research projects, consulting with employers, employees and representatives, surveying firms in low-paying sectors and participating in fact-finding visits to UK workplaces.

New rates

The new rates will be implemented on 1 October 2014 and are as follows:

Age groupNew ratePercentage increase
Workers age 21 and older£6.503% (19 pence)
Workers age 18-20£5.132% (10 pence)
Workers age 16-17£3.792% (7 pence)
Apprentices£2.732% (5 pence)

The content of this Regulatory Update is of general interest and is not intended to apply to specific circumstances. It does not purport to be a comprehensive analysis of all matters relevant to its subject matter. The content should not, therefore, be regarded as constituting legal advice and not be relied upon as such. In relation to any particular problem which they may have, readers are advised to seek specific advice. Further, the law may have changed since first publication and the reader is cautioned accordingly.