Increase in National Minimum Wage

The government has accepted the independent Low Pay Commission's recommendations for this year's adult and youth National Minimum Wage rates.

The government has today accepted the independent Low Pay Commission's (LPC) recommendations for this year's adult and youth National Minimum Wage (NMW) rates.

However, the government has concluded that the apprentice rate should be increased rather than frozen as recommended by the LPC. The LPC based this recommendation on concerns about level of compliance with the apprentice rate.

The following rates will come into effect on 1 October 2013:

the adult rate will increase by 12p to 6.31 an hour

the rate for 18-20 year olds will increase by 5p to 5.03 an hour

the rate for 16-17 year olds will increase by 4p to 3.72 an hour

the apprentice rate will increase by 3p to 2.68 an hour.

the accommodation offset increases from the current 4.82 to 4.91

Business Secretary Vince Cable said:

"The independent Low Pay Commission plays a crucial role in advising the government when setting the National Minimum Wage every year. It balances wages of low paid workers against employment prospects if the rate was set too high.

We are accepting its recommendations for the adult and youth National Minimum Wage rate increases, which I am confident strikes this balance. However, there is worrying evidence that a significant number of employers are not paying apprentices the relevant minimum wage rate.

Apprenticeships are at the heart of our goal to support a stronger economy, and so it is important to continue to make them attractive to young people. Therefore, I am not taking forward the LPC's recommendation to freeze the apprenticeship rate due to non-compliance, but instead am raising it in line with the youth rates. We are working on a series of tough new measures to ensure we tackle non-compliance issues across the board."

Chair of the LPC David Norgrove said:

"We welcome publication of our 2013 Report today and the government's acceptance of our recommendations on the level of the National Minimum Wage for adults and young people. We also very much welcome the government's commitment to tackle non-compliance in the areas highlighted by us.

The government will be working with employers, apprentices and training providers to improve awareness of rights and responsibilities on pay. Along with this, it will be undertaking focused enforcement work to clamp down on non-compliance by employers of apprentices.

The government supports work experience as a valuable way of helping young people get into work. The law on the NMW is clear. Work experience as part of an education course and pre-employment provision is exempt under the NMW regulations. However, if somebody is a worker under NMW legislation, then they are entitled to the minimum wage."

Commenting on the increase to the national minimum wage, Mike Cherry, National Policy Chairman, Federation of Small Businesses, said:

"The increase in the national minimum wage is unwelcome in today's economic climate.

We understand the Government must strike a balance between boosting consumer spending and economic growth, however they must ensure the UK's small businesses stay competitive at a time when the economy remains fragile.

"There will be businesses that operate on thin margins, who will struggle with any increase to the minimum wage. We therefore urge Government to place renewed impetus into driving down their overheads, such as business rates, energy and fuel costs, and freeing up cash-flow by ending the scourge of late payment by big companies to their suppliers.

"We have said in the past that there is a case for increasing the apprenticeship minimum wage further. This will boost the apprenticeship brand among young people and help small businesses attract the best young recruits. We believe the Low Pay Commission should look again at this next year."

Commenting on the government's decisions today on National Minimum Wage rates from 1 October 2013, Dr Adam Marshall, Director of Policy at the British Chambers of Commerce (BCC), said:

"We are disappointed that the government has chosen to raise the adult National Minimum Wage rate by 1.9%, an increase that is over 50% higher than current average pay growth. While the pressures of inflation are affecting many people, including the lowest-paid, the scale of this rise adds significantly to business costs, most of all by contributing to broader pay inflation. It will also make some employers less inclined to hire additional members"

"Restrained increases in the youth and apprenticeship rates of the National Minimum Wage will ensure employers have a continued incentive to hire young people, despite the fact that many lack demonstrable work experience. Ministers must remember that as well as wage costs, businesses must invest heavily in many young people to ensure they are ready for the world of work. They should therefore focus their energy on ensuring that the education and training system becomes more responsive to the needs of employers."

"Law-abiding businesses have no problem with enforcement of the National Minimum Wage for apprenticeships, particularly in cases where unscrupulous individuals deliberately flout the rules. However, law-abiding companies tell us repeatedly that the government must communicate better and more consistently with businesses, to ensure that all companies understand the rules for employing an apprentice."