Budget 2024: National Living wage to rise by 6.7%
Budget 2024:
National Living wage to rise by 6.7%
The Chancellor has confirmed in the budget the 2025 national living wage will rise which will ensure a pay rise for up to three million minimum wage workers as the hourly rate is increased in line with inflation giving a 6.7% increase.
This significant rise in the national living wage (NLW) from April 2025 will be worth £1,400 for a full-time worker over the age of 20, taking the annual salary to £23,809.76 before tax, which is £91.58 a day on a seven-and-a-half-hour shift.
The 6.7% increase is over three times higher than the most recent inflation figure, which fell to 1.7% in September.
Additionally, the national minimum wage (NMW) for those aged between 18 and 20 years will rise by 16% with a £1.40 hourly increase. This is the largest increase in this rate ever as the chancellor seems to intend to combine minimum wage and living wage over time.
The minimum wage for 18 to 20-year-olds is currently £8.60 an hour, rising to £10. In total this will be adding £2,500 to the annual salaries of a full-time worker in this age range.
These rises will mean that employers have had to deal with the adult rate rising over 20% in two years, and the challenges that has created alongside other pressures to their cost base.
Alongside the wage increases, national insurance contributions have also increased from April 2025 in the Budget, meaning employers will have wage increases as well as national insurance rises to contend with, which could then lead to difficult decisions in their businesses.
With Small businesses making up 99.2% of the total business population and generating three-fifths of the UK’s private sector employment, their contributions benefit the wider economy, often at great personal risk.
The move to hike employers’ national insurance will have an indirect consequence on “working people” by any definition. With less money available for small businesses to invest, along with the opportunities for pay rises, staff benefits and recruitment.
Additionally, the minimum wage for apprentices is also being increased dramatically from £6.40 to £7.55, a rise of 18%.
In total it is thought that 3.5m people are set to receive a pay rise as a result of these changes.
The office for National Statistics has found that the number of low paid jobs has already fallen from 9.8% in 2023 to 3.4% in April 2024, possibly as a result of the continued rise in minimum wages. This is the lowest it has fallen since it was first recorded in 1977. In comparison, high paid roles fell by just 0.7%.
Recruitment and Employment Confederation (REC) deputy chief executive said: ‘We need to avoid artificially driving inflation with price rises, when interest rates should be starting to fall.’
‘Businesses have set out to us and the government their concerns over their ability to continue to operate if there are further substantial increases to their cost base in the short-term – and very little on the horizon that points towards growth.’
Our Payroll department, along with the team here at Kennedys Accounting will be available to assist any clients with their questions regarding these changes – so please feel free to get in touch.