The Government has confirmed that the age from which workers become eligible for the national living wage will reduce to 23 (from 25), from April 2021
In his comprehensive spending review in November 2020, the Chancellor Rishi Sunak confirmed that the national living wage (NLW) will increase 2.2% to £8.91 from 1 April 2021 and will become available to people aged 23 and above, down from the current age of 25.
The National Living Wage 2021
Workers aged 23-24 years old will receive a substantial pay rise of 8.7%, as they now enter the National Living Wage bracket, which was previously for this aged 25 and over only.
Accepting “in full” the Low Pay Commission’s recommendations, the Chancellor also announced that the full national minimum wage rate, which from April 2021 only applies for those aged 21-22, will also increase. It will rise by 2.0% to £8.36.
The Chancellor said: “Taken together, these minimum wage increases will likely benefit around two million people. A full-time worker on the national living wage will see their annual earnings increase by £345 next year. Compared to 2016, when the [NLW] policy was first introduced, that’s a pay rise of over £4,000.”
| Rate from April 2020 | Rate from April 2021 | Increase | |
| National Living Wage (23 year old and above) | £8.72 | £8.91 | 2.2% |
| 21-22 Year Old Rate | £8.20 | £8.36 | 2.0% |
| 18-20 Year Old Rate | £6.45 | £6.56 | 1.7% |
| 16-17 Year Old Rate | £4.55 | £4.62 | 1.5% |
| Apprentice Rate | £4.15 | £4.30 | 3.6% |
| Accommodation Offset | £8.20 | £8.36 | 2.0% |
In the 2020 Budget, the government set a new target for the NLW to reach 66.7% of median earnings by 2024. It currently stands at 60%.
In its report, the LPC said its approach this year was to recommend rates that minimise any ‘significant risk’ to employment prospects, as per its remit. “This led us to recommend a 2021 NLW rate of £8.91. This is lower than our best estimate of the on-course rate of £9.06, but is modestly higher than the increase in prices, meaning low-paid workers’ living standards should be protected.”
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One of the key things to remember about the National Minimum and Living wages is that they are the law. There are very few exceptions and non-compliance can end in significant fines and even director disqualification.
So, for help and advice on the National Living and Minimum Wages, and all things payroll, contact us.
