The National Minimum Wage is set to increase in April 2024 to £11.44 per hour for workers over the age of 21, this is a hugely important development for the UK economy and businesses. The increase in the minimum wage will have several impacts, both positive and potentially challenging.
This is the biggest ever increase in the National Living Wage. The pay boost, worth £1,800 a year for a full-time worker, will benefit 2.7 million workers, according to an estimate from the Department for Business and Trade (DBT)
Since 2010 the National Living Wage will have doubled in cash terms from around £10,500 to nearly £21,000 a year for a full time worker, this is a 10% pay boost from £10.42 per hour to £11.44 per hour, the biggest increase in more than a decade!.
For the first time, 21 year olds on the National Living Wage will always earn two thirds of average earnings. This means that a 21 year old will get a 12.,4% increase from £10.18 t £11.44, which is a significant increase.
National minimum wage for younger workers will also increase, 18-20 year olds will from April 2024 now earn £8.60 per hour which is a £1.11 p/h pay boost.
The minimum hourly wage for an apprentice is boosted, with an 18-year-old apprentice in an industry like construction seeing their minimum hourly pay increase by over 20%, going from £5.28 to £6.40 an hour.
The National Living Wage was introduced in 2016 and currently sets the minimum hourly pay a person over the age of 23 earns when working. The new rate will now apply to 21- and 22-year-olds, and means that the government has met its ambitious target of lifting the National Living Wage to two-thirds of median earnings by 2024, ending low hourly pay for those on the National Living Wage.
Since 2010, the proportion of workers on low hourly pay has more than halved from 21.3% to 8.9%, supported by increases to the National Living Wage. Personal tax thresholds have been doubled, meaning a working person can now earn £1,000 a month tax-free for the first time.
Firstly, the increase in the national minimum wage is expected to benefit millions of low-paid workers across the UK. It can improve their standard of living and provide them with more financial stability. This is an important step in addressing issues of income inequality and poverty.
However, for businesses, particularly small and medium-sized enterprises, the increase in the minimum wage can pose challenges. It may lead to higher labour costs, which could impact their profitability and potentially result in job losses or reduced working hours for employees. Some businesses may also need to increase prices of their products or services to offset the higher labour costs.
On the other hand, a higher minimum wage could also lead to increased consumer spending, as low-wage workers have more disposable income. This can have a positive impact on businesses, particularly those in the retail and service sectors.
It’s important for businesses to carefully plan and adapt to the changes brought about by the minimum wage increase. They may need to reassess their business models, streamline operations, and consider potential productivity improvements to mitigate the impact of higher labour costs.
Overall, while the increase in the national minimum wage is a positive development for workers, it does present challenges for businesses. It will be important for the government, businesses, and labour organisations to work together to ensure a smooth transition and to find ways to support businesses in adjusting to the new wage levels.
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