Policy Paper on National Minimum and Living Wage: What Employers Should Expect

The Low Pay Commission (LPC) has recently published a Policy Paper outlining how it plans to address its updated remit from the government. The LPC, an independent body advising the government on the National Minimum Wage (NMW) and National Living Wage (NLW), is now tasked with considering the cost of living and expected inflation until March 2026 when making wage recommendations. It must also ensure that wage levels do not fall below two-thirds of median hourly earnings.

As wages are currently rising faster than inflation, the two-thirds median earnings figure is the basis of the LPC’s upcoming wage recommendations. In its assessment, the LPC will use various data points, including headline inflation measures, the ONS Household Cost Index (HCI), and other qualitative indicators of living standards.

Key takeaways from the LPC's Policy Paper for employers include:

• There is likely to be a larger increase in the wage rate for 18-20 year-olds compared to those aged 21 and above. This aligns with the government’s broader aim of eventually eliminating the separate rate for 18-20 year-olds.
• The LPC’s current central estimate suggests that an NLW increase to £12.10 (a 5.8% rise) will be needed to keep the NLW in line with two-thirds of median earnings, though this figure could change by the final recommendations.

The LPC submitted its recommendations to the government at the end of October 2024.

We also now have the figures for the 2025 National Minimum Wage rates (Minimum wage rates for 2025 - GOV.UK), effective from April 2025:   

• National Living Wage (21 and over) – £12.21
• 18-20 Year Old Rate – £10.00
• 16-17 Year Old Rate – £7.55
• Apprentice Rate – £7.55
• Accommodation Offset – £10.66

This reflects a 16% increase to the 18-20 year old rate and 18% for the 16-17 and apprentice rate, with a smaller 6% rise for over 21s.

If you have any questions about how these changes may affect your business, please contact our Employment Law team at 01635 896336 or email us at hello@fentonelliott.co.uk.