Millions of workers will be getting a boost in their wage packet from today due to an increase in the minimum wage. The National Minimum Wage and the National Living Wage are both being increased from Friday, April 1, after originally being announced in October by Chancellor Rishi Sunak.
The uplift in wages will apply to about 2.5 million people, according to the Department for Business, Energy, and Industrial Strategy, which claims it will put £1,000 a year more into full-time workers’ pay packets.
It comes on the day the energy price cap rises by a whopping 54% across the UK, with experts saying they expect the cap to rise even further from October.
Read more: The areas of Wales which will be worst hit when energy prices go up
Here's what you need to know about how much both the minimum wage and living wage are going up, and how it affects you.
What is the National Living Wage?
The so-called National Living Wage is the government’s set minimum rate, that employers must pay staff aged 23 and over for each hour worked. Essentially, if you’re over 23, you are legally entitled to the National Living wage. If you’re under 23, you are only entitled to the National Minimum Wage, which varies based on your age.
The Living Wage is calculated by the organisation Living Wage Foundation, which sets its sum based directly on the actual cost of living – things like paying for transport, rent, energy bills, etc. It is voluntary, meaning employers can choose to sign up to the Real Living Wage pledge if they want to, but they don't have to.
What is the National Minimum Wage?
This is the minimum pay per hour most workers are entitled to. People classed as ‘workers’ must be of at least school-leaving age to claim this wage.
How much are these going up by?
The complete list of minimum wage increases from April 1 is as follows:
- National Living Wage: £9.50 up from £8.91 (6.6 percent rise)
- 21-22-year-old rate: £9.18 up from £8.36 (9.8 percent rise)
- 18-20-year-old rate: £6.83 up from £6.56 (4.1 percent rise)
- 16-17-year-old rate: £4.81 up from £4.62 (4.1 percent rise)
- Apprentice Rate: £4.81 up from £4.30 (11.9 percent rise)
- Accommodation Offset: £8.70 up from £8.36 (4.1 percent rise)
Who do the increases not apply to?
The wage increases don't apply to all workers. Self-employed people, volunteers, prisoners, or people on pre-apprenticeships schemes don’t qualify for the National Minimum Wage.
How does this compare to how much my costs of living will be going up?
Although the increases in wages are some of the highest in several years, set against an unprecedented rise in household costs, they're likely to leave many households continuing to struggle.
Benefit and pension rates will both rise by 3.1%, in line with what inflation was last autumn. However, the Office for Budgetary Responsibility (OBR) is predicting inflation will hit a 40-year high by the end of this year. The current prediction is for the Consumer Prices Index (CPI) to be rising by 8.7% by the last quarter of 2022. That would be the fastest increase since April to June 1982.
The OBR is predicting this based on energy prices rising by 40%, or an average of £830, from October (they’re already going up 54% in April). That would take average bills from £1,277 last October and £1,971 this April to nearly £2,800 - a 120% rise in a year.
We already know the energy price cap goes up 54% from April 1 - with the average household expected to see their bills go up between £600 and £700 a year.
In September, Prime Minister Boris Johnson announced that National Insurance rates would be increased by 1.25 percentage points from April 2022 as part of the government’s plan to fund the NHS and social care.
According to iNews, those earning the average UK salary of almost £26,000 will have to pay £130 more in National Insurance each year, while those earning more than £50,000 will pay at least £505 more. However, it was recently announced that the lower earnings limit will rise by £3,000 from July, bringing it in line with the income tax threshold. This means you will not pay NI contributions unless you earn more than £12,570 – up from £9,568 in 2021/22.
Rents are now £62 per month higher on average than when the UK coronavirus lockdowns were first introduced, analysis by Zoopla recently found. Across the UK, the average monthly rent was £969 by the fourth quarter of 2021. Households who agree new lets are now having to pay an additional average annual cost of £744, or £62 per month, compared with typical costs in March 2020.
Most councils in Wales are proposing an increase in council tax this year, by at least one or two percent across all local authorities, and even more in others. Cardiff Council has approved a 1.9% rise in April, while in Newport it's 2.4%.
However, the Welsh Government is offering a £150 council tax rebate to low-income households to help with the cost of living crisis. Anyone in band A to D will get the payment, as well as those on low incomes. You should get this on April 1. To find out more about that click here.
People are also feeling the pinch from fuel and transport prices. Last week UK fuel prices hit record highs of 169p for unleaded and 179p for diesel, with one service station in Pont Abraham charging 199.9p for diesel at the weekend. Meanwhile, train passengers in England and Wales saw an increase in fares of up to 3.8% from March 1 - the steepest increase since January 2013.
Announcing the wage increases on Friday, Business Secretary Kwasi Kwarteng said: "We have never been more determined to make work pay, and by providing the biggest cash increase ever to the National Living Wage from today, we are giving a boost to millions of UK workers.
“While no government can control the global factors pushing up the cost of everyday essentials, we will absolutely act wherever we can to mitigate rising costs. With more employees on the payroll than ever before, this government will continue to stand up for workers.”
