Minimum Wage to Increase to £6.50 per hour

The Business Secretary Dr Vince Cable has announced that the minimum wage will increase 19p an hour to £6.50 later this year.

The government accepted the proposal from the Low Pay Commission for a 3% rise for those aged 21 and over. The rate for 18 to 20-year-olds will go up by 10p, or 2%, to £5.13 an hour while for 16 and 17-year-olds the statutory rate will rise 7p, also 2%, to £3.79. The minimum wage for apprentices will go up by 5p to £2.73 an hour.

All of the new levels will become effective from October 2014. Chancellor George Osborne is on record as saying that he ultimately wants to see the minimum wage rise to £7 per hour. To understand what new minimum wage requirements could mean for your business, speak to an employment lawyer .

Business organisations supportive

The increase will result in more than 1m workers gaining a pay rise and will be the first in a series of increases in real terms. Dr Cable called the rise “the biggest cash increase in the pay packets of the UK’s lowest paid employees since 2008”. The British Chambers of Commerce (BCC) applauded the new rates. “We are pleased that the Government has accepted the evidence-based approach to the minimum wage increase from the Low Pay Commission, rather than succumb to politically attractive alternatives,” commented Adam Marshall, executive director of policy at the BCC. Earlier this week, the CIPD released a report entitled Tackling low pay that found that the majority of employers support a minimum wage link to inflation.

London is a special case

Meanwhile, Professor Sir George Bain, the man who set up the minimum wage 15 years ago, said it is in need of major reform. The benchmark was a “child of its times” when launched in 1999 and it had become a “blunt instrument” and that many employers could now afford to pay their workers much more, he explained.

“If you set it at the ‘living wage’, which is about £7.65 an hour, you would cause massive unemployment in areas like retail and social care. But there’s only about five sectors where this is true. There’s a whole range of sectors where you could easily afford to pay more than the minimum wage.”

Sir George added that there should be a special case for London to have a higher national minimum and that the Low Pay Commission give longer-term forecasts for the benchmark, to help employers plan for the future.

Unite, the UK’s largest trade union, expressed dissatisfaction.

“The government claims it is on the side of working people but companies are sitting on a cash mountain of £500bn and they should be forced to share more of it with the lowest paid,” declared a spokesman.

IBB’s Employment Team provides advice on the employment aspects of all major business decisions. To contact a member of the team for advice, call us on 01895 207892 or email employment@ibblaw.co.uk