New year, new…National Minimum Wage rates

The UK Government has recently announced its acceptance of the Low Pay Commission’s (LPC) recommendations on the National Minimum Wage (NMW) rates for 2025. It is expected that these will apply from 1st April 2025.

The new rates are:

• National Living Wage (21+): £12.21 (up from £11.44)
• 18-20: £10.00 (up from £8.60)
• 16-17: £7.55 (from £6.40)
• Apprentice rate: £7.55 (from £6.40)
• Accommodation Offset: £10.66 (up from £9.99)

Labour’s ‘Plan to Make Work Pay’ stated they wished to ensure the NMW was a real living wage that people can live on. The Government advised that the LPC’s recommended National Living Wage rate is expected to equal two-thirds of median earnings and to have the highest real value in the history of the UK’s minimum wage.

Labour also proposed to “remove the discriminatory age bands” from the NMW rates. A 16.3% increase to the 18–20-year-old rate narrows the gap to the 21+ rate in anticipation of that rate being extended to 18-year-olds in the future.

The LPC’s remit this year was extended to ensure it considered the cost of living and inflation when making its pay rate recommendations, bringing it more in line with the considerations of the Living Wage Foundation when they set their Real Living Wage rates.

The Real Living Wage

On 23rd October 2024, the Living Wage Foundation announced its new rates, which are £13.85 per hour in London and £12.60 per hour in the rest of the UK.

The ‘Real Living Wage’ is separate from the Government’s rates. It is independently calculated based on the current cost of living and takes into account the essentials (such as groceries and rent) as well as certain luxuries (like buying birthday presents). It is currently paid voluntarily by more than 14,000 UK businesses.

Real Living Wage-accredited employers have six months (until 1st May 2025) to implement these rates and retain their accreditation.

Statutory pay

The Government has also confirmed its benefit and pension rates for 2025-26. These include:

• Statutory maternity pay, paternity pay, adoption pay, shared parental pay, parental bereavement pay and maternity allowance: £187.18 a week (up from £184.03)
• Statutory sick pay: £118.75 per week (up from £116.75)

The earnings threshold for most of the family- friendly rates has increased to £125 per week (up from £123). The earnings threshold for maternity allowance has remained at £30 per week. These rates are also expected to take effect from 1st April 2025.

Employers should make a note of these increased rates and ensure that they make preparations with payroll in plenty of time before 1st April 2025. These updated statutory rates are just one of the many legislative changes we are expecting to see over the course of 2025. If you require any information or assistance in respect of the updated statutory rates or any of the other anticipated changes to Employment Law, please contact our specialist Employment Team.