National minimum wage to increase from 1 October 2016

The government has accepted in full the recommendations of the Low Pay Commission on national minimum wage rates from October 2016, signifying increases ranging from 3% to 4.7%. What are the new rates?

The government has announced that the various rates of the national minimum wage (NMW) are all to increase with effect from 1 October 2016. The relevant increases are:

  • The adult rate for workers aged 21 to 24 will rise by 3.7% from £6.70 to £6.95 per hour

  • The youth development rate for workers aged 18 to 20 will rise by 4.7% from £5.30 to £5.55 per hour

  • The young workers rate for those aged 16 and 17 will rise by 3.4% from £3.87 to £4.00 per hour

  • The apprentice rate will rise by 3% from £3.30 to £3.40 per hour

  • The accommodation offset will rise from £5.35 to £6.00 per day - the offset is the one benefit in kind that can count towards the NMW and is the maximum daily sum that employers who provide accommodation can deduct towards those costs.

The increases follow the government's decision to accept all of the recommendations put forward by the Low Pay Commission (LPC). The rises are well above the current 0.3% rate of inflation and significantly above the average weekly earnings growth rate of 2.1%.

For workers aged 25 and over, the government is introducing the new national living wage (NLW) at £7.20 per hour from 1 April 2016. The hourly rate of the NLW will not increase in October 2016. Instead, the LPC will make recommendations this autumn on the rate of the NLW to apply from 1 April 2017.

Unlike in previous years, these new NMW rates are set to last for only six months, from 1 October 2016 to 31 March 2017. This is to reflect a change in the NMW calendar so as to align the rate change date for the NMW with that for the NLW from 1 April 2017. So, again, the LPC has been asked to report in the autumn on the level of the NMW rates to apply from 1 April 2017.

It’s been confirmed that inflation-busting increases to the various rates of the national minimum wage will take effect from 1 October 2016. In addition, it’s highly possible that the NMW rates will rise again from 1 April 2017 because the new rates are only going to be in place for six months before they are subject to a further review. This is to align the change date with that for the new national living wage.

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