National Minimum Wage and National Living Wage rates rise

The National Minimum Wage and National Living Wage rates rose on Friday 1 April 2022, the government announced on 31 March 2022¹. The National Living Wage, the statutory minimum for workers aged 23 and over, increased to £9.50 an hour from £8.91, a rise of 6.6%¹. The government said around 2.5 million UK workers would receive a pay rise, and that the uplift would put £1,000 a year more into the pay of a full-time worker¹.

The new rates apply across the UK. The 21 to 22 year old rate rose to £9.18 from £8.36, an increase of 9.8%, and the 18 to 20 year old rate to £6.83 from £6.56, up 4.1%¹. The 16 to 17 year old rate and the apprentice rate both rose to £4.81 from £4.30; the government described the apprentice increase as 11.9%¹. The accommodation offset rose to £8.70 from £8.36¹.

Source: GOV.UK¹

The government said the uplift would particularly benefit workers in retail, hospitality, cleaning and maintenance, and that the age threshold for the National Living Wage had moved from 25 to 23 in 2021, bringing more young workers onto the higher rate¹. It said the yearly earnings of a full-time worker on the National Living Wage would have risen by over £5,000 since the rate was introduced in April 2016¹. The rates were recommended by the independent Low Pay Commission and announced at the Chancellor's Spending Review 2021¹. The government restated its target of the National Living Wage reaching two-thirds of median earnings by 2024¹.

Business Secretary Kwasi Kwarteng said:

The rise took effect alongside other changes. The government said a £150 Council Tax rebate for households in Bands A to D in England, 80% of households, was being paid from 1 April 2022, and that a £200 reduction in energy bills for all households would follow in October 2022 through the Energy Bills Support Scheme¹. It said the Energy Price Cap set by Ofgem had risen by 54%¹. The Resolution Foundation, published on 31 December 2021, estimated that taxes and energy bills combined would rise overnight by an average of £1,200 a year per household in April, and that the poorest households would see their energy spend rise from 8.5 to 12 per cent of their total household budget². It also noted that National Insurance rates would rise by 1.25 percentage points in April 2022, as a precursor to the Health and Social Care Levy from 2023, and that April marked the start of a four-year Income Tax threshold freeze².

Which?, writing on 3 January 2022, noted that even after the change the National Living Wage would not match the Living Wage Foundation's then current real Living Wage of £9.90, which is calculated on the cost of living and which employers may choose to pay³. The Resolution Foundation described the 6.6% uprating as welcome and said the lowest earners would be protected by it².

Why it matters for households

Anyone paid at or near the statutory minimum in the UK saw their hourly floor change from 1 April 2022, with the largest percentage increases going to apprentices and 21 to 22 year olds¹. For a full-time worker on the National Living Wage, the government put the value of the increase at £1,000 a year¹. The change applied to pay from that date; it did not adjust earlier payslips.

The wage rise landed in the same month as other changes to household costs. The Council Tax rebate of £150 for Bands A to D in England began to be paid from 1 April 2022, while the £200 energy bill reduction was scheduled for October 2022¹. National Insurance contributions rose by 1.25 percentage points in April 2022². The Resolution Foundation estimated the combined effect of tax and energy changes at around £1,200 a year for the average household, with the National Insurance element falling more heavily on higher earners: around £140 for the bottom half of the distribution and £730 for the top half².

The statutory minimum is not the same as the voluntary real Living Wage. Which? reported that the real Living Wage stood at £9.90 and was calculated on the cost of living, with employers choosing whether to pay it³. The government said businesses were encouraged to pay above the statutory minimums where they could afford to¹.

What happens next

The government said it had published its remit to the Low Pay Commission asking for recommendations later in 2022 on minimum wage rates to apply from April 2023¹. It also said it would launch a communications campaign in the coming weeks to increase understanding among minimum and living wage earners of what they are legally entitled to and what steps they can take if they believe they are underpaid¹. Workers were directed to the Check Your Pay site to check their pay¹. The government said the Warm Homes Discount scheme would be extended until 2025/2026 and expanded to around £3 million low-income and vulnerable households a year, and that the Energy Company Obligation would receive £1 billion annual funding until 2026¹.