From October 2005, 1.3 million low paid workers will benefit from a further increase to the national mimimum wage. The current rate of £;4.85 will rise by 20p to £;5.05, in line with average earnings.

There will be a further increase in October 2006 to £;5.35. That is a 6% increase on the October 2005 level but it is subject to a further review by the Low Pay Commission (LPC) to reflect the economic conditions in a year's time. By October 2006, the rate will be nearly 50% higher than the £;3.60 rate originally introduced in 1999.

The youth development rate (workers aged 18-21) will increase from £;4.10 to £;4.25 in October 2005 and £;4.45 in October 2006.

The adult development rate (adults in their first six months of employment while receiving accredited training) will also increase to £;4.25 in October 2005. However, the LPC has recommended that this rate should be abolished from October 2006 and that, from the same date, the 12 months exemption from the minimum wage should be extended to cover all apprentices aged 19 and over.

No increase is to be made for the 16-17 year old rate, currently £;3, from October 2005. The LPC is to review the operation of this rate and report in 2006.

The Government has announced that it will keep under review the issue of whether to put 21 year old workers onto the adult rate. The LPC is also to review the minimum wage treatment of benefits in kind, including benefits that are offered as part of a salary sacrifice arrangement.

Although not announced in the press office published by the Department of Trade and Industry, it is expected that the accommodation offset will increase in line with the adult rate of the minimum wage, from £;3.75 to £;3.90 per day from October 2005 and £;4.15 per day from October 2006.

The national minimum wage is enforced by the Inland Revenue. More than £;3 million has been recovered since April 2004 for workers paid below the statutory rate and nearly £;20 million since April 1999. The Government will be announcing further measures to tackle serious non-compliant employers. The LPC has recommended that employers who underpay their workers should face financial penalties and pay their workers interest on any underpayment.

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...back to 25 February 2005

Sources:
Government News Network
Government News Network