Budget 2024: Minimum wage to rise to £12.21 an hour next year
Starting in April, minimum wages will increase, with the hourly pay for those over 21 expected to reach £12.21. This has been confirmed by the chancellor in advance of Wednesday's Budget announcement.
Rachel Reeves mentioned that the increase in pay represents an important advance in fulfilling Labour's commitment to providing workers with a "true living wage."
Workers who are between the ages of 18 and 20, as well as apprentices, will experience a rise in their minimum hourly wage.
The government stated that over three million employees will gain from this initiative, but companies have raised concerns that the increased expenses might lead them to reduce their recruitment efforts.
Will The Minimum Wage Increase? How Much?
The Treasury announced that the significant increase in the minimum wage for those under 21—which is the highest ever recorded—represents the initial move towards establishing a uniform pay rate for all adults.
This follows the government's directive to the Low Pay Commission, the body responsible for suggesting minimum wage rates, to take the cost of living into account when making its calculations.
Each year, the government establishes the rates for the National Living Wage and National Minimum Wage, which are then implemented in April of the following year.
Nye Cominetti, a leading economist at the Resolution Foundation, pointed out that although the rise is "positive news" for those with lower incomes, the 77p increase for employees over 21 years old is less than what was seen in the past two years.
However, she described the slight increase as "reasonable" considering the anticipated increase in National Insurance contributions for employers outlined in the Budget.
Small business owners have expressed worries about the effects of increased payroll costs and changes to workers' rights.
Christine Dobson Moore, who runs the Sanwitches Cafe in Sabden, close to Burnley, mentioned that her business was already having difficulty covering payroll for her staff.
"It's definitely quieter than it was before," she remarked. "Many of the politicians haven't experienced life like we do; they're out of touch with reality."
"Surprisingly Higher Than Expected"
Kate Nicholls, the CEO of UK Hospitality, expressed that companies are now facing the Budget with greater anxiety after the news of minimum wage hikes.
"Attempting to make up for budget shortfalls by targeting High Street businesses will only end up harming the hospitality sector. This approach jeopardizes jobs, discourages future investments, leads to higher prices for customers, and puts the survival of these businesses at risk," she stated.
Nick Mackenzie, the head of the pub chain Greene King, stated on the BBC's Today program that the increase in the minimum wage was "a bit more than we had expected."
However, he emphasized that the key issue for the industry is the "overall impact" of increasing costs for businesses.
When asked whether increasing expenses from higher wages and taxes could result in job losses and reduced investment, Mr. Mackenzie responded, "If businesses continue to face rising costs, it’s likely that will occur."
A representative from the Conservative Party stated that "any gains will be completely diminished if Labour introduces tax hikes on those who are employed," referring to the upcoming Budget on Wednesday.
Paul Nowak, the general secretary of the Trades Union Congress, supported the increase.
"Whenever the minimum wage increases, there are always some who warn that it will lead to higher unemployment rates. Yet, each time, their predictions turn out to be incorrect," he stated.
Claire Reindorp, the CEO of Young Women’s Trust, backed the pay raise, emphasizing that women often find themselves in lower-paying jobs, which means they have faced the brunt of the financial struggles in this country for an extended period.
There has been a lot of discussion about the tax increases that Labour is expected to propose. Reeves has stated that there is a £22 billion shortfall in the public finances that needs to be dealt with.
The Chancellor is likely to increase National Insurance, which employers already contribute in addition to the salaries they offer. This move is part of a broader plan to raise funds for public services, such as the NHS.
Currently, employers are charged a rate of 13.8% on any employee earnings that exceed £175 per week.
However, Reeves is also anticipated to reduce the point at which companies begin to pay the tax. Together, these two actions are projected to generate approximately £20 billion.
This action is believed to generate the highest amount of revenue in the Budget.
It has also sparked concerns about possible repercussions, especially since the government has stated that boosting the UK economy is a key focus.
Companies have cautioned that adding extra expenses will make it tougher for them to invest, hire new employees, and generate job opportunities.
In certain situations, companies might be able to transfer the rising costs to consumers by increasing their prices. However, wage increases for employees may be limited as businesses try to cut expenses.
Melanie Pizzey, the CEO of the Global Payroll Association, which represents payroll professionals, indicated that companies could restrict salary increases for employees making above the minimum wage as they try to manage expenses.