Everything you need to know about the new national living wage, which comes into effect today

Courtney Goldsmith
Follow Courtney
Consumer Inflation Could Rise Above 4 Percent In The Wake Of The Credit Crunch
The increase to wages could cost businesses (Source: Getty)

Debate has circled around an increased national living wage rate which was announced last November.

As the new rate goes into effect today, here's everything you need to know.

What is the national living wage?

The national living wage is a mandatory hourly rate of pay introduced in 2016 by former chancellor George Osborne so low wage workers can take a greater share of gains from the UK's growth.

The government has said it is working to move from a low wage, high tax, high welfare society to a higher wage, lower tax, lower welfare society.

How much has the rate increased?

From today, workers 25 and over will be paid £7.50 an hour, a 30p, or four per cent, rise from the original rate of £7.20. This will add up to a pay rise of more than £500 a year.

Read more: The Treasury is refusing to commit to a £9 hourly living wage by 2020

Who benefits from the hike?

The national living wage is paid to over 2m full-time workers 25 and older; workers 24 and under receive the minimum wage.

As of today, those 21-24 receive £7.05 an hour, 18-20 receive £5.60, under-18s receive £4.05 and apprentices receive £3.50.

What does this mean for businesses?

London firms are set to face a sharp rise in costs from today, and new research reveals thousands of City businesses aren't prepared.

Nearly 70,000 firms already experience "significant" financial distress before the sharp rise in business rates and the latest increase to the national living wage, according to insolvency firm Begbies Traynor.

"The Capital's businesses are facing challenges from all directions this year," said Julie Palmer, partner at Begbies Traynor.

This fiscal year alone (2017-18), the national living wage will set businesses back around £1.08bn, a rise of four per cent on last year.

What did the government say?

Business minister Margot James said:

“The government is committed to creating an economy that works for everyone and today’s rate rises are great news for some of the UK’s lowest paid workers. More than two million workers will receive an above inflation step up in pay, with some set for a £600-a-year pay rise.

“Every worker in the UK is entitled to at least the national minimum wage or national living wage and we are determined that they get it.

“From today, my clear message to everyone is to check your pay, talk to your boss and report underpayment to Acas.”

Read more: Be under no illusions: The National Living Wage will cost jobs

Related articles