Millions of workers on the minimum wage and living wage will be handed a pay boost at tomorrow’s Budget, the government has announced.
From April next year, the National Living Wage will be increased by 6.7% – a raise worth about £1,400 a year to eligible full-time workers.
At the same time, the National Minimum Wage – which is paid to those aged between 18 and 20 – will increase by the largest amount on record as Labour push towards abolishing age brackets altogether.
Chancellor Rachel Reeves said the move was a ‘significant step’ towards delivering on the government’s promise of a ‘genuine living wage for working people’.
But there is concern from some businesses that the move could pile further pressure on those struggling with costs.
Peter Connolly, the owner of Nortons Digbeth in Birmingham, said the measure ‘wouldn’t affect us too much’ as all employees at the popular music venue and Irish bar are paid according to the Living Wage Foundation’s figure.
But he told : ‘If you aren’t a Living Wage employer and you’re used to paying the government Living Wage or the minimum wage, that’s a big step up.
‘We felt it last year when the Living Wage Foundation went up nearly 10%.’
Lyle Bignon of the Night Time Industries Association added: ‘I can certainly see the incentive in terms of recruitment in terms of building workforces, and it’s very good news for the labour force that drives hospitality and the night-time economy.
‘However, from the business owner’s perspective, while it’s a great recruitment tool, they’re being squeezed at the other end.’
He said there was a ‘huge concern’ among small business owners that, despite the good news for workers, ‘without any other additional help from the government this Budget will turn into something of a nightmare for them’.
Kate Nicholls, Chief Executive of UKHospitality, said: ‘These wage rises are well above expectations, and make the Budget even more important.
‘It’s an added £1.9 billion to the hospitality wage bill, on top of the cost of the Employment Rights Bill and, if rumours about the Budget are true, employer NICs and business rate rises.
‘Trying to balance the books from the pockets of high street businesses will simply leave hospitality as collateral damage – threatening jobs, future investment, price increases for consumers, and business viability.’
What is the difference between national living wage and minimum wage?
The National Living Wage is the name given to the minimum wage guaranteed to workers aged 21 and over.
It is currently £11.44 an hour, but will increase to £12.21 an hour from April next year.
The National Minimum Wage is paid to those aged 18, 19 and 20. At the moment, it is £8.60 an hour but will rise to £10 an hour.
Labour says it is gradually aligning the two to create a single adult wage.
However, Mr Connolly suggested the rise was inevitable and could ultimately prove good news for businesses like his own.
He said: ‘The living wage has got to go up, the cost of living has gone up. And if it means people have got more disposable income, that’s great for pubs.’
The relatively high pay at Nortons Digbeth have meant the employee turnover is low, he added, and the surrounding businesses also had to raise wages to stop the pub getting ‘the pick of all the good staff’.
Alongside the increases in the living and minimum wages, the minimum hourly wage for an apprentice is also going up next year.
The raises come after recommendations from the Low Pay Commission.
Baroness Philippa Stroud, chair of the Commission, said: ‘Employers have had to deal with the adult rate rising over 20 per cent in two years, and the challenges that has created alongside other pressures to their cost base.
‘It is our job to balance these considerations, ensuring the NLW provides a fair wage for the lowest-paid workers while taking account of economic factors.
‘These rates secure a real-terms pay increase for the lowest-paid workers.’
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