Government Sets Out Low Pay Commission Remit On National Living Wage
The Government has set out its remit for the Low Pay Commission on National Living Wage rates, calling for it not to drop below two-thirds of UK median earnings, and to have a decision in place for it to apply from 1st April 2026.
It said it will push forward with plans to look at removing “discriminatory” age bands for the national minimum wage as it extended the remit of the Low Pay Commission (LPC) and that the advisory body will consult with employers, trade unions and workers on narrowing the gap between the minimum wage rate for 18 to 20-year-olds, and the so-called national living wage – the UK minimum wage for workers 21 years and older.
The LPC will also be required to put forward “recommendations on achieving a single adult rate in the years ahead”.
However, the government may need to increase the national living wage (NLW) from the current £12.21 to £12.71 in April 2026 to meet its own targets on salary increases, the Low Pay Commission (LPC) has said.
The independent body, which makes recommendations to the government on the national living and minimum wage, has said that this 4.1% increase would ensure that the national living wage does not fall below two-thirds of median earnings, the minimum level set by government. hat as predicting this figure is “challenging”, the recommended NLW may be within a wider range of £12.55 to £12.86.
Chancellor Rachel Reeves said: “To ensure the right balance is struck between the needs of workers, business affordability and the wider economy, the LPC is being asked to consult on several issues before recommending the new rates.”
Kate Nicholls, Chair of UKHospitality, said: “UKHospitality and its members have always supported the principle of the National Living Wage, and we share the Government’s ambition to raise living standards for everyone. The ambition is right, but the timing and pace of increases must be carefully considered in the context of the wider economic environment. What’s more, the publishing of the remit is coming a good six months later than normal, so the original forecasting of the impact is having to be adjusted. Despite this, it’s a positive that this is a maintain remit, not a lower one, as is the recognition of taking into account the wider macro-economic circumstances and challenging labour market.”
“With significant new costs, such as the increase made to employer National Insurance Contributions, already hitting businesses hard, any significant wage hike may cost jobs. We urge the Low Pay Commission to recognise these cost pressures and recommend a more gradual and sustainable increase this year.”
“Regrettably, escalating employment costs are already forcing businesses to reduce staff hours and, in some cases, make redundancies. Across the board, the labour market indicators are flashing red, and the Bank of England has also repeatedly voiced concerns about a potential wage-price spiral fuelling inflation. Inflating wages too far, too fast, would be counter-productive, resulting in fewer people earning a little more, but many more facing job losses or reduced hours, ultimately undermining the goal of putting more money in people’s pockets.”
“The Government rightly places economic growth at the heart of its mission, but for that to succeed, wage policy cannot be set in a vacuum. Therefore, we strongly advocate that the LPC’s approach and subsequent targets fully take account of the impact on employment levels and overall economic growth. This will ensure that future National Living Wage rates support, rather than hinder, our shared goal of a prosperous economy with opportunities for all.”