What is the National Minimum Wage and National Living Wage?
The minimum wage a worker should get depends on their age and if they’re an apprentice.
The National Minimum Wage is the minimum pay per hour almost all workers are entitled to. The National Living Wage is higher than the National Minimum Wage – workers get it if they’re over 25. From 1 April 2021 the National Living Wage will apply if workers are aged 23 and over.
National Minimum Wage 2021
At the end of last year the Government announced that it accepted in full, recommendations made by the Low Pay Commission at the end of October 2020 and announced the National Living Wage (NLW) and National Minimum Wage (NMW) rates which will come into force from April 2021.
The National Living Wage will increase by 2.2% from £8.72 to £8.91, and will be extended to 23 and 24 year olds for the first time. For workers aged under 23, Commissioners recommended smaller increases in recognition of the risks to youth employment which the current economic situation poses.
What do these changes mean for workers?
The increase in the NLW will mean that low-paid workers’ incomes rise broadly in line with predicted wage growth; and modestly ahead of projected increases in prices, meaning low-paid workers’ living standards should be protected. The Low Pay Commission (LPC) believe that the recommended increases do not present a significant additional risk to employment prospects, beyond the already challenging outlook.
Given uncertainties over the long-term economic outlook, the LPC have not recommended any change to the Government’s target of the NLW reaching two-thirds of median earnings by 2024. The LPC’s report sets out an indicative future path for the NLW; but the effects of furloughing on pay data limit its precision. It is also worth noting that the LPC submitted its recommendations on 30 October, which was before the announcement of further lockdown restrictions in England and the extension of the Coronavirus Job Retention Scheme.
The National Minimum Wage (Amendment) Regulations 2021 is a Statutory Instrument which comes into force on 01 April 2021 and applies UK-wide.
The New Rates for 2021
The table below shows the new rates together with details of the increases that have been applied, which are in line with the LPC’s recommendations published in October 2020:
|Rate from April 2020||Rate from April 2021||Increase|
|National Living Wage||£8.72||£8.91||2.2%|
|21-22 Year Old Rate||£8.20||£8.36||2.0%|
|18-20 Year Old Rate||£6.45||£6.56||1.7%|
|16-17 Year Old Rate||£4.55||£4.62||1.5%|
National Living Wage vs UK Living Wage
The National Living Wage is different to the UK Living Wage and the London Living Wage calculated by the Living Wage Foundation. Differences include that: the UK Living Wage and the London Living Wage are voluntary pay benchmarks that employers can sign up to if they wish, not legally binding requirements; the hourly rate of the UK Living Wage and London Living Wage is based on an attempt to measure need, whereas the National Living Wage is based on a target relationship between its level and average pay; the UK Living Wage and London Living Wage apply to workers aged 18 and over, the National Living Wage to workers aged 23 and over. The Low Pay Commission has no role in the UK Living Wage or the London Living Wage.