National minimum wage 2010/2011: 2.2% increase to £5.93 per hour announced for October 2010

The increase to the national minimum wage adult rate is in line with that recommended by the Low Pay Commission (LPC) in its 2010 report (PDF format, 3.9MB) (external website). The report states that this increase is "in line with the forecast increase in average earnings."

The LPC report also includes the following recommendations on the national minimum wage, each of which the Government has also accepted:

The Government has also announced that, with effect from 1 October 2010:

• The national minimum wage "youth development rate" (for workers aged 18 to 20) will rise from £4.83 per hour to £4.92 per hour (an increase of 1.8%). This increase is based on the projected rise in consumer prices index (CPI) inflation.
• The national minimum wage youth rate (for workers aged 16 and 17) will rise from £3.57 per hour to £3.64 per hour (an increase of 1.9%). This increase is also based on CPI forecasts;
• An apprentice minimum wage rate of £2.50 per hour will be introduced. The LPC recommends that the apprentice rate be "applied as a single rate to those apprentices currently exempt from the National Minimum Wage. That is all those under the age of 19 and those aged 19 and over in the first 12 months of their apprenticeship. The wage should cover both those employed on traditional contracts of apprenticeship and employed apprentices on government-supported Level 2 and 3 schemes."

The Budget 2010 report (PDF format, 3.47MB) (external website) included the following official statement on the level of the national minimum wage adult rate uprating for 2010/2011:

This increase strikes a balance between helping low paid workers and families, and ensuring that the rise does not damage their employment chances. When increased in October 2010, the NMW will have risen by over 22% in real terms since the Government introduced it in 1999.

CBI deputy director-general John Cridland was supportive of the national minimum wage increase (external website), commenting:

This moderate increase recognises that many businesses are struggling, and helps protect jobs at a time of rising unemployment. The inflation-busting rise some unions had called for would have hit firms hard and put many lower paid workers on the dole.

Once again the Low Pay Commission has managed to resist employer calls for a freeze and has been able to agree a modest increase to the minimum wage rate despite the difficult economic times. [...] This is a relatively modest increase which the evidence shows employers can afford.

UPDATE: National minimum wage 2011/2012 increase to £6.08 per hour comes into effect The national minimum wage adult rate increases to £6.08 per hour for 2011/2012 with effect from 1 October 2011. This represents an increase of 2.5% on the 2010/2011 national minimum wage adult rate, which previously stood at £5.93 per hour (from 1 October 2010 to 30 September 2011).

The future of the national minimum wage: Two-year increases & removal of income tax burden in prospect? What might we expect from future annual increases to the national minimum wage? It is possible that we will see major change to the national minimum wage over the coming years. Potential changes include: the introduction of two-year national minimum wage increases; and an increase of the minimum income tax threshold to remove income tax obligations from workers on the national minimum wage.

Update (Sunday 8 May 2011): National minimum wage 2011/2012: How will the 2.5% increase to £6.08 for October 2011 stack up against inflation? With private sector pay expectations subdued, the 2011/2012 national minimum wage increase could prop up whole economy pay awards in the closing months of 2011. But how will it compare with inflation? It was announced on Thursday 7 April 2011 that the national minimum wage adult rate will increase to £6.08 per hour for 2011/2012, with effect from 1 October 2011. This represents an increase of 2.5% from the 2010/2011 national minimum wage adult rate, which currently stands at £5.93 per hour (from 1 October 2010 to 30 September 2011). The 2011/2012 national minimum wage adult rate (at £6.08 per hour) is therefore set 15p per hour higher than the 2010/2011 rate. The BBC's Robert Peston commented via Twitter that the "announced increase in the [national] minimum wage of 2.5% to 608p is considerably less than current rate of inflation."

Update (Thursday 7 April 2011) >> National minimum wage 2011/2012 announced:

The national minimum wage adult rate will increase to £6.08 per hour for 2011/2012, with effect from 1 October 2011. This represents an increase of 2.5% from the 2010/2011 national minimum wage adult rate, which currently stands at £5.93 per hour (from 1 October 2010 to 30 September 2011). The 2011/2012 national minimum wage adult rate (at £6.08 per hour) is therefore set 15p per hour higher than the 20102/011 rate.

According to the Department for Business, Innovation and Skills (BIS) the national minimum wage rates for 2011/2012 will be as follows:

The following rates will come into effect on 1 October 2011:

• The adult rate will increase by 15p to £6.08 an hour;
• The rate for 18-20 year olds will increase by 6p to £4.98 an hour;
• The rate for 16-17 year olds will increase by 4p to £3.68 an hour; and
• The rate for apprentices will increase by 10p to £2.60 an hour.
  

Business Secretary Vince Cable comments:

More than 890,000 of Britain's lowest-paid workers will gain from these changes. They are appropriate - reflecting the current economic uncertainty while at the same time protecting the UK's lowest-paid workers. I would like to thank the LPC for doing a good job in difficult circumstances.

The BBC's Robert Peston comments via Twitter:

Today's announced increase in the minimum wage of 2.5% to 608p is considerably less than current rate of inflation.

See also:

• National minimum wage 2012/2013: What can we expect from the October 2012 national minimum wage increase? Given the current backdrop of ongoing economic uncertainty, subdued pay awards, rising unemployment and falling inflation, news of the annual increase to the national minimum wage for 2012/2013 (due to come into effect on Monday 1 October 2012) will be particularly closely watched. Here, we look at what might be expected from the national minimum wage increase for 2012/2013. This post will be kept updated as new information emerges on what we might expect from the national minimum wage in 2012/2013.
• 2011 Budget: Can we expect an announcement on the national minimum wage 2011/2012? Can we expect the national minimum wage rate for 2011/2012 (which will come into effect from 1 October 2011) to be announced in the 2011 Budget speech, which Chancellor George Osborne is set to deliver on Wednesday 23 March 2011? The national minimum wage 2011/2012 announcement will be highly anticipated, as this will represent the first time that the level of the national minimum wage will have been set under a Conservative Chancellor since the introduction of the national minimum wage in 1999.

• National minimum wage: What are the new rates for 2010/2011? and National minimum wage: Increases for 2010/2011 effective today Full details of the national minimum wage rates for 2010 and 2011, which came into effect from 1 October 2010.

• National minimum wage 2010/2011: Why some 21 year-olds will be enjoying a 22.8% pay increase  The adult rate of the national minimum wage will be extended to 21 year-old workers from October 2010 (subscription required) (it is currently paid to workers aged 22 and over). This means that workers who have turned 21 prior to 1 October and who are receiving the national minimum wage when the 2010/2011 national minimum wage uprating comes into effect can look forward to an increase that is effectively worth (what is likely to prove to be) an inflation-busting 22.8%.

• National minimum wage 2010/2011: Government confirms October 2010 increase will go ahead as planned The coalition Government has accepted the Low Pay Commission's (LPC) recommendations for the 2010/2011 national minimum wage increase, which is scheduled to come into effect on 1 October 2010.
  

• What will George Osborne's emergency budget mean for the national minimum wage in 2010/2011 and beyond? Chancellor George Osborne's emergency budget will be very closely watched when it is delivered later this month (on Tuesday 22 June 2010). This is the first time that a Conservative Chancellor has had the opportunity to determine policy on the national minimum wage since its introduction in 1999. So what might Osborne's emergency budget have in store for the national minimum wage?
• Conservative-Liberal Democrat coalition: Osborne sets date for emergency 2010 Budget It remains to be seen if Chancellor George Osborne's emergency budget on 22 June 2010 will include any detail on the coalition Government's stance on the national minimum wage.
• General election 2010: Brown says national minimum wage "will reach £7" per hour by end of next Parliament in 2015 Gordon Brown stated that if the Labour party won the 2010 general election, the national minimum wage would "reach £7 [per hour] on reasonable assumptions by the end of the Parliament".
• National minimum wage rises by 61% between 1999 and 2009 The national minimum wage has risen significantly between its introduction in April 1999 and its most recent increase (which came into effect on 1 October 2009), climbing over this period from the introductory rate of £3.60 per hour to its current level of £5.80 per hour. This represents an increase of 61.1% over the 10-year period between 1999 and 2009.
• What can we expect from the 2010/2011 national minimum wage increase?