UK markets closed

Millions of 'minimum wage heroes' set for 6.2% pay rise

Tom Belger
Finance and policy reporter
The UK government announced how much the national minimum wage increased on 1 April. (PA)

Almost 3 million of Britain’s lowest-paid workers are set for a pay rise, after the biggest ever hike in the legal minimum wage.

The wage floor, now rebranded the ‘national living wage,’ increased on Wednesday from £8.21 to £8.72 an hour for workers aged 25 and over.

Union leaders welcomed the pay boost for “minimum wage heroes,” including many working in vital roles in healthcare and supermarkets during the coronavirus lockdown.

But two leading think tanks had urged the government to delay the hike, warning against increasing costs for employers at a time of enormous economic upheaval.

The new national minimum wage rates

Workers should see an increase in their next pay packets, after the 6.2% hike for over-25s came into effect on 1 April.

Those aged 21-24 will see a 6.5% rise to £8.20 per hour. Workers aged 18-20 will receive £6.45, and 16- and 17-year-olds will receive £4.55. The apprentice rate will rise to £4.15.

The new rates are different to, and remain lower than, the voluntary ‘living wage,’ a separate measure based on analysis of the income needed to meet basic needs. The current living wage is £10.75 an hour in London and £9.30 outside the capital.

Boost for workers on coronavirus frontline

“Many of the nation's key workers – in, for example, the care sector, agriculture, transport and retail – are low-paid, are continuing to work in very difficult conditions and will benefit from today’s increase,” said Bryan Sanderson, chair of the Low Pay Commission, which advises the government on the minimum wage.

Frances O’Grady, general secretary of the Trades Union Congress (TUC), said Britain was “indebted to its army of minimum wage heroes."

Read more: Entrepreneurs ‘falling through the cracks’ of UK coronavirus wage schemes

She said many were struggling to make ends meet, welcoming the rise but calling for the legal minimum to be hiked to the level of the voluntary living wage. It would be “the best way to show our respect,” she said.

Paddy Lillis, general secretary of the Usdaw shopworkers’ union, said many low-paid workers in retail were “finally being recognised as essential in the current crisis.” He welcomed the pay rise, but also called for a swift hike to £10 an hour.

Higher costs for firms ‘risks job losses’

Experts had warned against raising business costs amid a growing economic crisis, however. With many firms crippled by plummeting demand and the government lockdown triggered by the coronavirus, think tanks had urged the government to delay the pay rise.

Tom Waters, a senior research economist at the Institute for Fiscal Studies (IFS), warned the hike could “undercut” the government’s other policies to keep firms afloat and stop job losses.

The government is offering £330bn of loans and guarantees, and grants to ‘furlough’ and cover wage costs for workers who would otherwise face the axe.

Prime minister Boris Johnson and chancellor Rishi Sunak pushed on with a minimum wage rise despite the growing economic storm. (PA)

Even a senior economist at the Resolution Foundation, which focuses on improving living standards, said the current climate “puts the latest rise in a new light.” Nye Cominetti said the think tank had long supported minimum wage hikes, but warned higher costs risked pushing some hard-hit firms into cutting staff.

He said firms in low-paying sectors such as hospitality, leisure, travel and retail were at the heart of the economic crisis, and argued delaying the rise could help them “weather the storm.”

Read more: Coronavirus ‘will wipe 15% off GDP’ in next quarter

The Low Pay Commission said it would review whether an “emergency brake” was needed on future rises.

A government spokesman told PA it was right workers were fairly rewarded and should not “lose out during this time of disruption.” He said the government recognised the increased employer costs, but highlighted its coronavirus job retention scheme to save jobs.

Watch the latest videos from Yahoo Finance UK