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Understanding the Wage Increase in April 2020

Wage Increase

April 2020 will see the National Living Wage increase, resulting in low-paid workers earning almost a thousand pounds more each year. The new rate will come into effect on 1 April 2020, rising from the current rate of £8.21 to £8.72 for workers over the age of 25.
The rise will mark an increase of 6.2% for employees. But how does the wage increase impact businesses and why is the National Living wage being increased in the first place?

Why is the National Living Wage Being Increased?

In April, global HR systems will have to make changes to how people over the age of 25 in the UK are paid. But younger workers will also benefit from a boost, with a rise of 4.6% and 6.5% based on their age. Those within the bracket of 21 to 24 will see their hourly rate rise from £7.70 to £8.20. Prime Minister, Boris Johnson states that employees haven’t seen a pay rise in too long and this was the driving force behind the increase.
The rise has come into effect following the Conservatives’ promise during the annual conference last September when they stated that they would increase the National Living Wage to £10.50 an hour of the next five years, economic conditions permitting. Furthermore, the increased rates were advised by the Low Pay Commission – an independent body that provides advice to the Government surrounding the living wage.

What Do the Pay Rises Include?

For over 25-year-olds, the pay rise will mean that their hourly rate will now be £8.72. For other age groups, the rise will look like this:

  • For 21-24-year-olds, there will be a 6.5% increase from £7.70 to £8.20
  • For 18-20-year-olds, there will be a 4.9% increase from £6.15 to £6.45
  • For under 18-year-olds, there will be a 4.6% increase from £4.35 to £4.55
  • For apprentices, there will be a 6.4% increase from £3.90 to £4.15

How Do the National Living Wage and Minimum Wage Differ?

Wage Increase The National Living Wage was introduced back in 2016 by the government and was billed as a higher minimum wage rate for those aged 25 or over and is legally binding. Minimum wage, however, is a wage rate that was released by the government and is a negotiated settlement based on advice from businesses and trade unions. The actual living wage is independently calculated which aims to be higher than the cost of living in the UK, including London. It takes into account the cost of renting a property, council tax, shopping costs, and travel. For those living in London, the real living wage is £10.75, which is £1.45 more than the rest of the UK. But companies aren’t legally obliged to sign up to the real living wage if they don’t want to. Those that do can become an accredited real living wage employer to set themselves apart from their competitors and attract potential employees. Around 4,700 businesses are accredited real living wage employers, including Nestle, Burberry, Ikea, Oxfam, and Aviva.

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Any facts, figures or references stated here are made by the author & don't reflect the endorsement of iU at all times unless otherwise drafted by official staff at iU. This article was first published here on 10th February 2020.

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