Agressive increases in minimum wage thresholds came into force on the 1st of April 2024. Vital to protect many young and unskilled workers from exploitation, the bar has seen impressive increases in recent years. So how have minimum wages increased this year, and what do you need to know?
Across all age brackets, workers experienced increases of over £1 per hour, with the national living wage increasing from £10.42 to £11.44. In addition to increased wage limits, 21 and 22 year olds can also enjoy being bumped up into the living wage threshold. This means workers 21 and over are now entitled to the living wage.
What Is The Minimum Wage?
The minimum wage was first introduced by Tony Blair’s Labour Government in the National Minimum Wage Act 1998. Although a number of wage controls for different sectors had been established throughout the 20th century, this act was the first to establish a minimum rate for all work. The act sets a minimum compensation per hour of work, and even if not paid by the hour, pay must not fall below this threshold.
The national living wage was introduced in 2016 as a higher level of minimum wage, which applied to workers 25 and over only. Over time this age threshold has been reduced. As of April 2024 the age bands are:
- 21 years and over – National Living Wage
- 18 – 20 years
- 16 – 17 years
- The separate apprentice rate
The rates are decided by an independent body, the Low Pay Commision (LPC). Each November the LPC advises the government on new rates for the following April. Research suggests that increases in minimum wage not only benefit the lowest paid workers. Also workers paid just above the minimum wage experience boosts in pay. The reason for this ‘spillover’ is the need to maintain pay differentials at the bottom of the hierarchy.
Over time the LPC has steadily increased the national living wage at a rate faster than average wage growth. The aim is to increase the adult minimum wage as a percent of 25+ median pay, known as the ‘bite’. When first introduced in 1998, the bite was only 45%. However by 2023 this had reached 64%. As such, between 2022 and 2023, whilst most workers experienced pay decreases in real terms, the lowest 20% of workers experienced real term pay growth.
How Is Minimum Wage Enforced?
The HM Revenue and Customs (HMRC) enforces the national minimum wage on behalf of the Department for Business and Trade. In doing so, enforcement officers may ask for relevant documents and remove them from the premises. A Notice of Underpayment is issued if an enforcement officer finds evidence of underpayment.
If found to have underpaid workers, employers must pay all arrears to workers at the current rate. Additionally, a fine of 200% of arrears is levied, capped at £20 000. The minimum penalty is set at £100.
Is Anyone Exempt?
The National Minimum Wage Act 1998 applies to the vast majority of workers. These include part-time workers, casual workers, disabled workers and foreign workers. Nonetheless, exceptions are made for specific categories of employees. These include:
- Self employed people who run their own business
- Company directors
- Volunteers
- Members of the Armed Forces
- Family members of the employer living in the employer’s home
- workers younger than school leaving age
- share fishermen
How Does The U.K. Compare?
Across many western countries, there are similar rates of minimum compensation. For example, the rate is set at: Germany (£10.63); France (£9.98); The Netherlands (£11.36); Australia (£11.98); and Ireland (£10.88). The highest minimum wage exists in Luxembourg at £12.73 / hour for unskilled workers. Meanwhile, American workers enjoy a federal minimum of just £5.82 / hour.