National Minimum Wage Act 1998
The National Minimum Wage Act 1998 (c. 39) creates a minimum wage across the United Kingdom.[2] From 1 April 2024, the minimum wage is £11.44 for people aged 21 and over, £8.60 for 18- to 20-year-olds, and £6.40 for 16- to 17-year-olds and apprentices.[3] (See Current and past rates.)
This article is about an Act of Parliament in the United Kingdom. For other uses, see NMWA (disambiguation).Long title
An Act to make provision for and in connection with a national minimum wage; to provide for the amendment of certain enactments relating to the remuneration of persons employed in agriculture; and for connected purposes.
1998 c. 39
England and Wales; Scotland; Northern Ireland
31 July 1998
It was a flagship policy of the Labour Party in the UK during their successful 1997 general election campaign.[2] The national minimum wage (NMW) took effect on 1 April 1999. On 1 April 2016, an amendment to the act attempted an obligatory "National Living Wage" for workers over 25 (now extended to workers aged 23 and over), which was implemented at a significantly higher minimum wage rate of £7.20. This was expected to rise to at least £9 per hour by 2020,[4] but in reality by that year it had only reached £8.72 per hour.[5]
Background[edit]
No national minimum wage existed prior to 1998, although there were a variety of systems of wage controls focused on specific industries under the Trade Boards Act 1909. The Wages Councils Act 1945 and subsequent acts applied sectoral minimum wages. These were gradually dismantled until the Trade Union Reform and Employment Rights Act 1993 abolished the 26 final wages councils, which had protected around 2,500,000 low-paid workers.
Much of the Labour Party had long opposed a government minimum wage because they feared that would reduce the need for joining trade unions, which they supported. Also, they feared that the minimum wage would in practice become the maximum wage since employers would be satisfied with paying only that amount.
Part of the reason for the shift in Labour's minimum wage policy was the decline of trade union membership over recent decades (weakening employees' bargaining power),[2] as well as a recognition that the employees most vulnerable to low pay, especially in service industries, were rarely unionised in the first place. Labour had returned to government in 1997 after 18 years in opposition, and a minimum wage had been a party policy since as far back as 1986, under the leadership of Neil Kinnock.[6]
The implementation of a minimum wage was opposed by the Conservative Party[2] and supported by the Liberal Democrats.[7]
The NMW rates are reviewed each year by the Low Pay Commission, which makes recommendations for change to the Government.[8]
The following rates apply as of April 2024:[9]
In his 2015 budget, George Osborne announced that from 1 April 2016, a further rate known as the "National Living Wage" ("NLW") will apply to those aged 25 or over and will be at the rate of £7.20 per hour. This was successfully introduced into legislation.[10] As of April 2022 this rate is £9.50 per hour and the minimum
age threshold was decreased to 23 in April 2021.
In November 2023, Jeremy Hunt announced that all workers over 21 would receive the National Living Wage of £11.44 per hour from April 2024 onwards. [11]
Perspectives[edit]
The policy was opposed by the Conservative Party at the time of implementation, who argued that it would create extra costs for businesses and would cause unemployment. In 1996, The Conservative Party's future leader, David Cameron, standing as a prospective Member of Parliament for Stafford, had said that the minimum wage "would send unemployment straight back up".[24] However, in 2005 Cameron stated that: "I think the minimum wage has been a success, yes. It turned out much better than many people expected, including the CBI."[25] It is now Conservative Party policy to support the minimum wage.[26]
While Mayor of London, Boris Johnson, future Conservative Prime Minister, supported the London living wage, ensuring that all City Hall employees and subcontracted workers earn at least £7.60 an hour and promoting the wage to employers across the city. In May 2009, his Greater London Authority Economics unit raised the London Living Wage for City Hall employees to its current rate of £7.60, £1.80 more than the legal minimum rate of £5.80.[27]
To put the pay in an annual perspective, an adult over the age of 25 working at the minimum wage for 7.5 hours a day, 5 days a week, will make £1,417/month and £17,004/year Gross Income. After pay-as-you-earn tax (PAYE) this becomes £1266.89/month or £15,202.72/year (2019/2020).[28][29] Full-time workers are also entitled to a minimum of 5.6 weeks paid holiday per year from 1 April 2009, with pro-rata equivalent for part-time workers. This includes public holidays.[30]
At the September 2021 Labour Party Conference, Labour Party members voted in favour of a £15 an hour minimum wage.[31] The motion calling for a £15 an hour minimum wage was put forward by the Unite union.[31] Labour Party leader Keir Starmer and his leadership team did not indicate a preference either in favour or against the motion.[31] Though it is thought that Starmer is unlikely to adopt the policy.[32] Organisations who support a £15 an hour minimum wage include: the Green Party of England and Wales,[33] the Bakers, Food and Allied Workers' Union (BFAWU),[34] the Trades Union Congress,[35] and the GMB trade union, who call for "the National Minimum Wage to be replaced with a Real Living Wage rate" at £15 for all ages.[36]