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April 19, 2013

National Minimum Wage new rates announced

The National Minimum Wage (NMW) is to rise following the government's acceptance of the independent Low Pay Commission's (LPC) recommendations for this year's rates.

The following rates will come into effect on 1 October 2013:

  • the adult rate will increase by 12p to £6.31 an hour;
  • the rate for 18-20 year olds will increase by 5p to £5.03 an hour;
  • the rate for 16-17 year olds will increase by 4p to £3.72 an hour;
  • the apprentice rate will increase by 3p to £2.68 an hour;
  • the accommodation offset increases from the current £4.82 to £4.91.

The decision to raise rates for apprentices actually goes against the LPC's advice to freeze rates. Business secretary Vince Cable said: "Apprenticeships are at the heart of our goal to support a stronger economy, and so it is important to continue to make them attractive to young people. Therefore, I am not taking forward the LPC's recommendation to freeze the apprenticeship rate due to non-compliance, but instead am raising it in line with the youth rates. We are working on a series of tough new measures to ensure we tackle non-compliance issues across the board."

The increase has not been universally welcomed by business groups. Mike Cherry, national policy chairman of the Federation of Small Businesses (FSB), said: "We understand the Government must strike a balance between boosting consumer spending and economic growth, however they must ensure the UK's small businesses stay competitive at a time when the economy remains fragile. There will be businesses that operate on thin margins, who will struggle with any increase to the minimum wage."

Head of policy at the Forum of Private Business (FPB), Alex Jackman, said: "Any additional cost is an unwelcome one. However, we appreciate that for the second year running the Government has implemented an increase in the National Minimum Wage that is below inflation, and for this restraint employers will no doubt be thankful."

However, the Chartered Institute of Personnel and Development (CIPD) approved of the planned increases. Ben Willmott, CIPD head of public policy, said: "The announcement is a welcome one. CIPD research has found that most employers support the concept of the minimum wage and support increasing it to boost the living standards of lower paid workers."