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National Minimum Wage Changes – Oct 2016

Posted by Charlotte Morley in Accounts, Business, News, Tips | 0 comments

From the 1st October 2016 the national minimum wage (NMW) is changing, as recommended by the Low Pay Commission (LPC) in March 2015. 

The national minimum wage (NMW) applies to all workers and is paid at different rates according to age. There is a separate rate for apprentices and from April 2016 a new National Living Wage (NLW) applied to workers aged 25 and over. 

Last year (2015), the government rejected the LPC’s recommendation for the apprentice rate and the new apprentice rate saw a rise of 57p, the largest ever increase in National Minimum Wage for apprenticeships. This higher than recommended rise was set by the government with the belief that apprenticeships will deliver a wage that is comparable to other choices for work – and in turn seeing more people in apprenticeships.

Business Secretary Vince Cable is also planning to launch the National Minimum Wage Accelerator – an online tool which will make it easier to compare rates of pay across regions, sectors and occupations. It will take data from the annual survey of hours and earnings and display information about pay so that people are able to compare wages with others in their sector and region.

So what exactly are the rises going to be? Well, from 1st October 2016:

  • minimum wage for 21-24 year olds increases by 25 pence to be £6.95 an hour
  • Youth Development Rate, affecting 18-20 year olds, will be £5.55 an hour an increase of 25 pence
  • the rate for 16 to 17 year olds increases by 13 pence to £4.00 per hour
  • the apprentice rate increase by 10 pence to £3.40 per hour
  • the adult rate (25+) remains the same at £7.20 per hour

For workers aged 25 and over (last on list above), the Government is introduced the £7.20 National Living Wage – in effect a fifth minimum wage rate – from 1 April 2016.

The LPC will make recommendations this Autumn on the rate of the National Living Wage to apply from April 2017, bearing in mind the Government’s ambition for the rate to reach 60 per cent of median earnings by 2020, subject to sustained economic growth. It will continue to advise on the other rates on its previous basis: protecting as many low-paid workers as possible without damaging jobs or the economy.

But how will this affect businesses around the UK? A study from the National Institute of Economic and Social Research and Centre For Macroeconomics (yes, that’s quite a mouthful), suggested that following the previous increases in average labour costs may have been accompanied by increases in labour productivity. Where negative profit effects where found – these tend to be concentrated amongst low-paying SMEs. So will it be the same this time around?

Perhaps you’re at a cross road and unsure whether to employee more staff or outsource some of your business functions? Take a look at our Employing vs Outsourcing Blog and get in touch to arrange a completely free consultation to find out how The Business Hut can assist your business.

Thanks for stopping by,


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