UK Introduces New Minimum Wage Rules to Reflect Living Costs, Impacting Over 172,000 Workers

The UK is set to introduce new minimum wage rules this week, marking a significant shift as living costs will be factored into the National Minimum Wage for the first time. According to the government, the National Minimum Wage is "the minimum pay per hour almost all workers are entitled to."

An independent body, the Low Pay Commission (LPC), is responsible for setting the rate following instructions from the Secretary of State for Business and Trade. The current National Minimum Wage is £11.44 per hour for those over 21 and £8.60 for 18-20-year-olds.

Historically, the LPC has not had to base its recommendations on whether the wage would allow low-paid workers to make ends meet. However, recent revelations have highlighted the necessity for change. In February, it was found that 524 employers had failed to pay their workers nearly £16 million, leaving over 172,000 workers out of pocket, in clear breach of the National Minimum Wage law.

Labour Reforms

Following their victory in the recent General Election, the Labour Party has initiated reforms to employment laws. On 30 July, Jonathan Reynolds and Angela Rayner will write to the LPC regarding new National Minimum Wage considerations. Under the new Labour government, the LPC will now factor in living costs and reduce age-related wage gaps when setting the National Minimum Wage.

Reynolds, the new Secretary of State for Business and Trade, has emphasised the importance of considering everyday living costs when determining the National Minimum Wage. He also advocates for narrowing the wage gap between younger and older workers.

"Our focus remains on putting more money in working people's pockets and boosting economic growth. For too long, working people have faced the worst of the cost-of-living crisis, but this government is taking bold action to address it and make work pay," he said. The new remit to the LPC is the first of many vital steps we will take to support more people to stay in work and improve living standards."

Deputy Prime Minister Angela Rayner added, "For too many, putting in a serious shift, work isn't paying enough to cover the basics. That is why we are moving quickly to restore security and dignity to all the people putting in the hard graft to build this country from the ground up - giving hope to those striving to make life better for themselves and their families. Our new deal will protect working adults with a genuine living wage, creating a stronger, fairer and more aspirational future for work in Britain."

Age Bands and Public Support

A recent poll for the Trades Union Congress (TUC) showed that 71% of voters support scrapping the "discriminatory" age bands of the Minimum Wage, which sees younger workers paid less than older colleagues for the same work. The poll revealed strong backing across the political spectrum for all workers aged 18 and over to be paid the same minimum wage rate, with a large majority of Labour (82%), Conservative (64%), Lib Dem (76%), Green (88%), and Reform (69%) voters supporting the change.

"Everyone should be paid a fair rate for their job," said TUC General Secretary Paul Nowak. But hundreds of thousands of young workers are suffering a huge pay penalty because of an outdated and discriminatory system. Young people up and down the country face the same cost-of-living pressures as everybody else—they shouldn't be getting less for doing the same work as older workers."

While there are currently no plans to reform the system to implement a flat rate, Reynolds will instruct the LPC to narrow the gap between the minimum wage rate for 18-—to 20-year-olds and the National Living Wage as a "first step" towards eliminating the lower rate for younger staff.

Labour's Commitments

Delivering a "genuine living wage" was a key pledge in the Labour Party's 'New Deal for Working People' document, released in January. The document outlined significant changes to employment law. While there has been speculation that some of these proposals might be watered down following business consultations, the party's election manifesto committed to introducing new legislation within 100 days.

Other crucial proposals include updating trade union legislation and banning exploitative zero-hour contracts. The Labour plan aims to give workers the right to demand fixed work hours, using a 12-week average.

The government has also committed to reforming trade union rights, expanding union rights to access workplaces, ensuring employers remind employees of their right to join a union, and simplifying the union recognition process. Additionally, they plan to introduce Fair Pay Agreements in some industries, including the social care sector, where trade unions will have the power to negotiate fair pay and terms and conditions.

These proposals aim to reverse the changes made by the Conservative government to trade union powers over the past decade.