As part of her Budget speech, the Chancellor formally announced that the National Living Wage (NLW), the ‘adult’ statutory minimum pay rate that applies to all workers aged 21 and over, will rise to £12.21 from next April. At 6.7%, the increase is lower than those applied in both April 2024 (9.8%) and April 2023 (9.7%) but it is nonetheless somewhat higher than both current inflation rates and median pay rises.
The statutory minimum has reached two-thirds of median earnings, the current floor for the NLW, with the April 2024 uprating, meaning the comparatively high increases (of almost 10%) seen in recent years to move the NLW towards this target were not necessary for 2025. However, higher-than-anticipated earnings growth across the economy, and the Government's new requirement that the Low Pay Commission (LPC) should take both expected inflation and cost-of-living factors into consideration in setting its recommended rates, have had an upward effect on the NLW increase. As such, employers with large numbers of staff on or near the statutory minimum may see a compression of differentials with their next-level supervisory rates.
A further requirement of the LPC’s updated remit is that National Minimum Wage (NMW) rates for workers aged 18 to 20 should continue to move closer to the full adult rate. As such, this year’s NMW for this age group has increased by a higher amount (16.3%) and will be £10.00 from next April.
