Senior Policy & Research Officer CIPP
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National Minimum Wage rates remain a challenge during pandemic

Samantha Mann discusses the latest consultation from the Low Pay Commission (LPC) that seeks to establish appropriate National Minimum Wage (NMW) rate recommendations for April 2021.

22nd Apr 2020
Senior Policy & Research Officer CIPP
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Minimum wage in a dictionary
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The impact of COVID-19 continues to challenge the UK, not only as a society but also its economy and its employers. Whilst the subject and all its implications on the work of payroll dominates every minute of our working day, what has happened to all the ‘business as usual’ challenges?

Background

The National Living Wage (NLW) was introduced during the summer 2015 Budget (the year with two Budgets). The Chancellor of the day, George Osbourne, announced a new NLW of over £9 an hour by 2020, which at the time represented the prediction for 60% of median earnings.  

The LPC was tasked with setting out how the 60% rate would be achieved by 2020 and from that point built in processes to their annual review that set and charted the necessary annual increases.

The NLW aspiration was set subject to rates being sustainable, taking into account economic growth and broader economic conditions. The NLW did build in a tolerance for some loss of employment, something that the LPC has always been tasked to protect when recommending National Minimum Wage (NMW) rates.

April 2020 saw the target of 60% median earnings being met with the NLW rate at a slightly less headline-grabbing rate of £8.72.

Calls were made to pause the increase due to the coronavirus outbreak, but the crisis came too late to postpone increases for pay periods that began on or after 1 April. Due to the complexities of pay deadlines, many payrolls would already have been processed with the increases before the pandemic hit the UK.

LPC new remit

But how will COVID-19 impact the rates for 2021?

The LPC 2020 annual review will consider this impact, as well as the impact of the UK leaving the EU may have had, as it sets out with a new remit, which aims to see the NLW achieve a rate that is two-thirds of median earnings.

NLW is currently payable to employees and workers aged 25 and above, but this age range is due to be extended to include 23 and 24 year olds from 2021, with a further extension to include 21 year olds by 2024.

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