The government is reportedly set to increase the minimum wage in Wednesday’s budget, meaning more than a million people are in line for a pay rise.
The Times reported chancellor Rachel Reeves will increase the minimum wage by a further 6%. It comes after the minimum wage rose by more than 9% per year in 2023 and 2024 under the previous Tory government.
Here, Yahoo News UK explains what the minimum wage is and how it could change under the reported plans.
What is the minimum wage and who is eligible?
It is the minimum hourly rate employees must receive for their services.
There are two versions of it: the national minimum wage, for people of at least school leaving age; and the national living wage, for those aged 21 and over.
Every worker is entitled to it, whether they are full-time, part-time, casual labourers, agency workers or apprentices.
How much is it and how much could it rise to?
The current national living wage is £11.44 an hour. About 1.6 million people receive this. A 6% rise would see this go up to £12.12.
The national minimum wage for under 18s is £6.40 an hour, and £8.60 for people aged between 18 and 20. It is not known how much these rates will increase, though Reeves is reportedly set to announce a bigger increase for 18 to 20-year-olds to bring them closer to the over-21 wage.
The reported 6% increase to the national living wage would follow the government’s recent instruction to the Low Pay Commission, which recommends minimum wage rates, to include the cost of living in its calculations. Last month, it said it expected a 5.8% increase.
There is also a separate – and higher – “real living wage” of £12.60 an hour, or £13.85 for people in London. The Living Wage Foundation charity sets this and is not obligatory: it is a voluntary scheme which employers can choose to sign up to.
‘Most successful economic policy in a generation’
The minimum wage was introduced by Tony Blair’s government in 1999.
Twenty-five years on, it has been hailed by the Resolution Foundation think tank as the “single most successful economic policy in a generation”.
It said: “Between 1980 and 1998, hourly pay growth in the UK was twice as fast for the highest earners as it was for the lowest earners (3.1% versus 1.4% per year).
“But since 1999 – when the minimum wage was brought in – this trend has reversed, and hourly pay inequality has fallen with pay growth for the lowest earners five times that seen by the highest earners (1.6% versus 0.3% per year).”
It said this pay growth for Britain’s lowest earners “is equivalent to them earning £6,000 more per year, compared to if their earnings had simply continued to grow in line with typical wages since 1999”.
What can I do if I’m not being paid enough?
In February 2024, the government revealed that more than 500 firms had been found to not paying the minimum wage, with employers ordered to repay workers nearly £16 million.
If you are not being paid the national living wage or national minimum wage, consumer organisation Citizens Advice recommends first having an “informal chat” with your employer.
The government has a pay calculator service to help with such discussions.
If your employer agrees it has made a mistake, arrangements should be made immediately to pay you what you are owed.
This should not be paid in kind with other benefits such as free meals or a greater share of tips or gratuities.
If you still have issues, you can get help from Citizens Advice, or via Acas, the arbitration service.