MILLIONS of workers will receive a pay rise next year when minimum wage rates go up, Rachel Reeves has confirmed.
The Chancellor has accepted recommendations so people on lower incomes are “properly rewarded” for their work as she helps to cut the cost of living.
The National Living Wage will go up by 4.7 per cent to £12.71 per hour for workers aged 21 and over.
It will give a full-time worker an annual boost of £900.
Ms Reeves has also given the green light for 18 to 20-year-olds will increase by 8.5 per cent to £10.85 per hour.
A full-time worker will now see an increase in their annual earnings of £1,500.
The National Minimum Wage for 16 to 17-year-olds and apprenticeships will be up by 6 per cent to £8 per hour.
A total of 2.7 million younger and older people will benefit, the government said.
Although the pay rise will be good news for millions of workers, the nation is set for a nightmare Budget on Wednesday as Ms Reeves is set to launch a huge tax raid on families’ finances.
Households should brace themselves for a range of money-raising tactics as the Chancellor tries to fill a £20billion black hole.
This includes a sneaky income tax rise through the back door as Ms Reeves is expected to extend the deep freeze on tax thresholds, known as a stealth tax.
This means more people are dragged into higher income tax brackets as inflation pushes their wages up.
A tax on “fun” such as a hike to gambling taxes could take place, as well as an attack on the cash Isa allowance and pensions.
Commenting on the pay rises, Ms Reeves said: “I know that the cost of living is still the number one issue for working people and that the economy isn’t working well enough for those on the lowest incomes.
“Too many people are still struggling to make ends meet, and that has to change.
“That’s why today I’m announcing that we will raise the National Living Wage and also the National Minimum Wage, so that those on low incomes are properly rewarded for their hard work.
“These changes are going to benefit many young people across our country, getting their first job.”
But fears were growing among business groups over the rise especially the hospitality sector who say a total £1.4 billion will be added to their wage costs.
The increase comes after warnings that an increase could harm the employment chances of the young.
What is the difference between the National Minimum Wage and National Living Wage?
The National Minimum Wage is the minimum pay per hour most workers are legally entitled to by law.
The rate varies depending on your age and whether you’re an apprentice.
However, the National Living Wage is the minimum amount that workers who are 21 or older must be paid.
The National Living Wage is the highest rate of the National Minimum Wage.
If you’re being paid less than these thresholds, talk to your employer.
You can ring these helplines for advice if you’re worried about being underpaid:
You can also complain to HMRC about your employer.
Louise Murphy, a Resolution Foundation economist, previously said: “Government policy has made employers less willing to take on young people.
“There is a genuine risk that doing another year of very large increases could harm their employment prospects.”
But Kate Nicholls, Chair of UKHospitality, said: “Increases to minimum wage rates are yet another cost for hospitality businesses to balance, at a time when they are already being taxed out.
“These additional costs make action at the Budget to reduce hospitality’s tax burden even more important, especially if businesses are expected to sustain this level of annual wage increase.
“Hospitality businesses have reached their limit of absorbing seemingly endless additional costs. They will simply all be passed through to the consumer, ultimately fuelling inflation.”
Helen Dickinson, Chief Executive at the British Retail Consortium said: “The proposed rise to National Living Wage is in line with the core expectations of the Low Pay Commission, helping retailers plan for the future.
“However, employment costs have risen significantly since Labour came to power, with last year’s rise to employer NI and NLW costing the industry over £5 billion.
“While the higher rise for young people will be a challenge for some employers, over 95% of retailers pay all their workers NLW or higher, regardless of age.”
Katherine Chapman, Director of the Living Wage Foundation, said: “The boost to the legal minimum wage is a really positive move that will ease some of the pressure on low paid workers hit by sharp price rises over the last year.
“It will still fall short of the voluntary real Living Wage which is the only wage rate based solely on the cost of living.
“The real Living Wage is currently £13.45 in the UK with a higher rate of £14.80 in London.”
The Real Living Wage is different to the Living Wage.
This is calculated on the cost of living, and is paid by over 16,000 employers – whereas the Living Wage is calculated by the Living Wage Foundation.
Who gets the National Minimum Wage?
You qualify for the National Minimum Wage if you are of school leaving age, which is usually above 16.
You are eligible to receive the pay rate if you work full-time or part-time.
Apprentices also qualify for a National Minimum Wage, as well as trainees and staff still in their probationary period.
The rates also apply to disabled workers.
Those who are self-employed, voluntary workers, company directors, and family members who live in the home of the employer and do household chores do not qualify for the minimum wage.
Au pairs, members of the armed forces, and people on a government employment programme are also not entitled to the payment
