National Minimum Wage: changes to age-related pay rates

With Labour's victory in the 2024 general election, what will their proposed reforms of the National Minimum Wage outlined in their manifesto and their plan to “Make Work Pay” mean for business?

Labour’s key goal is to ensure that the National Minimum Wage is a real living wage that is sufficient for people to live on. To achieve this goal, they will remove the “discriminatory” age bands which are currently in place, to ensure that all adults are on the same pay. In April 2024 the National Minimum Wage increased by nearly 10%, making the headline minimum wage rate £11.44 per hour. The current wage for 18–20-year-olds is £8.60 and the rate for 16–17-year-olds and apprentices is just £6.40.

Implementing a single wage rate for all adults will see younger workers, who are currently being paid less than their older colleagues for (in some instances) doing the same work, benefit. The Trade Union Congress (TUC) suggests that “on average 18–20-year-olds could be missing out on £2,400 a year because they are not covered by the main minimum wage.” Given the current economic climate and rising cost of living this adjustment could significantly enhance the financial situation of young workers. However, in the alternative this may signal a downturn in employment opportunities for these entry level positions for the younger generation, who may have been given an opportunity by an employer based on the lower level of National Minimum Wage payable.

Labour have also stipulated that there will stringent enforcement of the National Minimum Wage by a Single Enforcement Body and HMRC, where they will have powers to make sure the genuine living wage is enforced, including penalties for non-compliance. The existing framework for National Minimum Wage legislation, along with compliance and enforcement, is already a highly complex area. Businesses will need to be mindful of their obligations and ensure compliance to avoid falling foul of these enhanced powers.