The Department for Business and Trade has published an updated remit for the Low Pay Commission, following Labour’s victory at the General Election.
The government has said it is determined to deliver a genuine living wage, backed by evidence and consistent with delivering inclusive growth for working people and competitive businesses across the UK, and has asked the Low Pay Commission to recommend a National Living Wage which should apply from April 2025.
This should, the government says, take into account the impact on business, competitiveness, the labour market, the wider economy and the cost of living, including the expected annual trends in inflation between now and March 2026.
The updated Low Pay Commission remit covers the following areas:
- The Government has asked the Commission to ensure that the rate for workers aged 21 and over does not fall below two thirds of median earnings
- The Low Pay Commission has been tasked with recommending a separate rate for 18-20 year olds in 2025, with a view to removing age bands for the National Living Wage rate in the future
- The Government has asked the Commission to consider the impact of its recommended rate on business, the labour market, competitiveness, the wider economy, and the cost of living, as well as inflation trends.
Kate Nicholls, Chief Executive of UKHospitality, said:
“Our staff are the lifeblood of hospitality and businesses are passionate about properly rewarding them for their crucial role.
“That’s why we agreed with the current remit of the Low Pay Commission to maintain wage rates at 66% of median earnings, which will see the Living Wage increase at twice the rate of inflation. After all, this is the basis upon which hospitality businesses have been planning and budgeting.
“However, making significant changes to the remit for 2025 now is disruptive and unhelpful. Evidence has been submitted to the LPC on a basis that is now out-of-date. It would have been far more pragmatic to wait and make these changes in 2026.
“With a new remit now in place, the LPC must recognise that the 20% increase to wage rates over the past two years clearly accounted for the cost of living. I would urge them not to recommend yet another significant increase, which would raise serious questions over affordability.
“As the Government recognises in its letter to the LPC, wage rates should be consistent with delivering growth for both staff and businesses. There now must be a fresh round of consultation with business groups before recommendations are made to ensure that balance is struck in an affordable manner, particularly in how it addresses changes to youth rates.
“It’s also the case that business costs need to come down to offset rising wage costs, and that should start with the Government fulfilling its manifesto commitment to reduce the burden of business rates on hospitality businesses, as well as reducing employer National Insurance Contributions.”
