The rise will take effect in October, as Business Secretary Vince Cable has accepted in full the independent Low Pay Commission’s recommendations for 2014, including plans for bigger increases in future than in recent years.
The Low Pay Commission (LPC) has said the rise, the first real terms cash increase since 2008, is manageable for employers and will support full employment.
The National Minimum Wage rates from 1 October 2014, as recommended by the LPC, will be:
- a 19p (3%) increase in the adult rate (from £6.31 to £6.50 per hour);
- a 10p (2%) increase in the rate for 18-20 year olds (from £5.03 to £5.13 per hour)
- a 7p (2%) increase in the rate for 16-17 year olds (from £3.72 to £3.79 per hour)
- a 5p (2%) increase in the rate for apprentices (from £2.68 to £2.73 per hour)
Business Secretary Vince Cable said: “The recommendations I have accepted today mean that low-paid workers will enjoy the biggest cash increase in their take home pay since 2008. This will benefit over one million workers on National Minimum Wage and marks the start of a welcome new phase in minimum wage policy.
“The independent Low Pay Commission plays a crucial role in advising the government about the minimum wage. This is why I asked them to look at how we could restore the real value of the National Minimum Wage as the economy recovers.
“The LPC’s new forward guidance gives us a much better understanding of how an economic recovery can be translated into faster and significant increases in the National Minimum Wage for low paid workers, without costing jobs.
“The experts will continue to advise government on future wage rises to help the low paid, and in the meantime I urge businesses to consider how all their staff – not just those on the minimum wage – can enjoy the benefits of recovery.”
The Business Secretary officially welcomed the LPC’s assessment that 2014 will mark the start of a new phase of bigger increases, provided economic conditions continue to improve.
This analysis of the prospects for rises that could restore the value of the National Minimum Wage to its peak in real terms, follows a specific request by the Business Secretary for the LPC to provide forward guidance on what economic conditions would be necessary to allow faster increases in National Minimum Wage without harming employment rates.
It is the first time the government has been provided with a broader evaluation of the issues that affect low pay, and it outlines what kind of economic recovery is needed to ensure greater rises in National Minimum Wage.