What is the national living wage UK

National Living Wage in the UK 2021

On October 27, 2021 the Chancellor Rishi Sunak undertook the final presentation of the much-awaited Autumn Budget. This budget was unique as it highlights the various measures the UK government plans to implement to revive the still bleeding economy resulting from the COVID-19 pandemic. The budget’s focus remains on supporting the countrymen for better growth opportunities, employment, and public finances.

Chancellor Sunak highlighted that the budget lays the groundwork for the country’s recovery in the post-pandemic world. One of the most prominent announcements revolves around the hike in the national living wage (NLW) and national minimum wage (NMW) rate applicable next year for UK workers.

Due to the pandemic, the public sector workforce and low-paid employees remain among the worst-impacted sections of British society. Thus, this announcement might relieve their troubles to a significant extent.

Team Initor Global UK is here to help you grasp the crucial nuances regarding the living wage rate in the UK and the revisions brought forth in the new budget.

What is the minimum wage in the UK?

As per the legal regulations, the minimum wage in the UK is coined in terms of an hourly rate. The minimum wage rate varies as per the age of the individual in Britain. There are two major categories of wages applicable in the country- the minimum wage and the national living wage.

The minimum wage rate covers individuals between the ages of 16 to 22. At the same time, the national living wage rate involves workers from the slightly elder category. It relates to the workforce of the age of 23 and above.

One must also note that the pay rate for apprentices aged 16 to 17 also differs from the remaining workers. Apprentices aged above 19 who have completed the first year of their apprenticeship also remain entitled to the minimum wage rate.

What are the prevailing minimum wage rates till March 2022?

What is the national living wage UK

Before the budget announcement, the minimum wage and living wage rates were revised in April 2021. As per the previous revision, the present minimum wage rates are tabulated as below.

Age Category Hourly wage rate (Up to March 2022)
16-17 years £4.62
18-20 years £6.56
21-22 years £8.36
National living wage earners (23+) £8.91

Please note that the minimum wage rate for apprentices is currently £4.30. The accommodation offset rate is £8.36. It refers to the figure the government specifies as a threshold that employers can take as the value of the provision of accommodation to their employees.

What are the revised minimum wage rates from April 2022?

The current autumn budget and spending review aim to back the living standards of the several low-paid employees across the United Kingdom. Overall, a hike of 6.6 percent is anticipated in the national living wage rates starting from April 2022. The young workforce, including apprentices in the country, will also benefit from an increased minimum wage rate.

As per the suggestions offered by an autonomous Low Pay Commission, the UK administration shall raise the national living wage to £9.5 per hour. The hourly wage rates applicable to the workforce in the different age categories shall revise respectively by the following percentages.

– For the workers in the age category of 16 to 17, there is a 4.1 percent raise
– Similarly, for the workers in the age category of 18 to 20, there shall also be a 4.1 percent raise
– For the workers in the age category of 21 to 22 years, there is a declaration of a 9.8 percent increase
– For apprentices working in the UK, there is an 11.9 percent surge in the hourly rate
– Lastly, the national living wage rises by 6.6 percent per hour.
The accommodation offset rate has also increased. As a result, there is also a 4.1 percent rise in the offset rate.

Let us get a summary of the revised rates for national living and national minimum wages.

Age Category Revised hourly wage rate
16-17 years £4.81
18-20 years £6.83
21-22 years £9.18
23 years and above £9.50
Apprentices £4.81

The accommodation offset rate is increased to £8.7 per hour.

What is the expected effect of the NLW and NMW increase for the workers?

The increase in the national living wage shall allow full-time minimum wage workers to earn an additional £1000 annually. Also, since the initiation of the national living wage in 2016, the overall annual pay rise sums up to £5000.

It is anticipated that the NLW and NMW raise shall vastly advantage the female population in the UK as they are more likely to get paid as per the minimum rates. The government has also lowered the taper rate applicable to Universal Credit users to 55 percent, with effect from December 1, 2021.

Thus, households dependent on such Universal Credit can retain more amount of what they receive. All and all, the low-income groups can gain increased assistance from these welfare initiatives. This move will improve the lives of over 1.9 million Brits in the future.

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