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The effects of National Minimum Wage and the National Living Wage increases

10 May 2022

As of April 1st 2022, the rates for the National Minimum Wage and the National Living Wage have increased. This is likely to impact around 2.5 million workers across the UK and should equate to a pay rise of around £1,000 a year for full time workers. With inflation set to hit 7% this year, the increase is designed to try to give workers some more financial flexibility – even though wage growth is still failing to keep up with the rising cost of living.

National Minimum Wage and the National Living Wage increases

As of 1st April 2022, the National Minimum Wage hourly rate for people aged 21-22 has increased from £8.36 to £9.18 an hour. For those over the age of 23, the National Living Wage has increased to £9.50. Apprentices will also see a small increase with hourly rates rising from £4.81 to £4.30 an hour. While the increases are welcomed, they come against previous promises to increase the National Minimum Wage to £10.50 an hour.

Does the rise go far enough?

Data from the Office for National Statistics shows that wage growth in the UK has fallen far behind rising prices. For example, between October and December last year, average weekly pay fell by -1.2%. While the National Minimum Wage and the National Living Wage increases will benefit some to the tune of £1,000 per year, this may not even be enough to cover the forecast energy price rises that many currently face thanks to the recent removal of the price cap. That’s before you factor in the 7% rise in the cost of goods and services that is forecast for 2022.

What effect will the wage increase have?

Both the National Minimum Wage and the National Living Wage are statutory minimums that many businesses use as guidance when it comes to worker salaries. So, as a result of the increases many organisations will need to factor in this increased cost. The government encourages most businesses to use these minimums as guidance but to pay workers over and above the thresholds where it’s possible to do so. That could mean some significant number crunching for those enterprises that have wages structured around National Minimum Wage and the National Living Wage levels.

The Real Living Wage

Another barometer for judging the potential of these wage increases when it comes to their value in supporting the UK’s recovery is the Real Living Wage. This is a wage rate that is based on the actual cost of living in the UK – and which is voluntarily paid by 10,000 UK employers. Currently, the Real Living Wage is £9.90 an hour across the UK and £11.50 in London.

There is a clear focus on the need to recover and rebuild now that the impact of the pandemic is easing for many businesses. That’s likely to require many more employers to achieve a balance between the need workers have for more than the government minimums – despite the recent increases – and their own business bottom line.

MBM Omega is proud to confirm its accreditation to the Real Living Wage Foundation as part of its policy to ensure fair wages for staff.