The Government has confirmed the new National Living Wage (NLW) and National Minimum Wage (NMW) rates, effective from April 2025, which will bring significant changes that employers in the leisure and hospitality sectors need to prepare for.
These changes, which are based on the Low Pay Commission’s (LPC) recommendations, will impact payroll costs and operational budgets.
Changes in NLW rates
For the first time, the LPC considered the cost of living, including the expected rate of inflation up to March 2026, when determining its recommendation.
From 1 April 2025, the new wage rates will be:
- For workers aged 16-17 and apprentices: £7.55 per hour (an increase of £1.15, or 18%).
- For workers aged 18-20: £10.00 per hour (an increase of £1.40, or 16.3%).
- For workers aged 21 and over: £12.21 per hour (an increase of 77p, or 6.7%).
Impact on employers
The leisure and hospitality sectors, known for employing a large number of young and part-time workers, will need to navigate these wage increases carefully. Employers must not only consider their young and part-time workers but also their salaried employees, as many of these may already be close to the minimum rates.
Leisure and hospitality employers will need to budget for higher wages, including reviewing financial plans and adjusting budgets accordingly, particularly in view of the recent increase to employer’s National Insurance contributions.
As the NMW does not include any pay premiums, such as overtime premiums, employees may want to revisit increased pay premiums for new joiners and include this in any review of budgets accordingly.
Making Work Pay
The Next Steps to Make Work Pay paper, published on 10 October, confirms the Government’s intention to remove the “discriminatory age bands” in the NMW. The large increase in the new NMW rates for workers under 21 appears to be the start of the Government’s proposal to narrow the gap, in anticipation of the adult rate being extended to 18 year olds in future years.
We anticipate that the future proposal for one single adult wage rate may impact the recruitment of younger employees, as those employees who are between the ages of 18 and 21 will be entitled to the same pay as workers who are 21 and over.
Key Contacts
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at November 2024.