National minimum wage increase: How much do we earn

The national minimum wage was first introduced in 1999. At the time, it was set at £3.60 for anyone over 22 and £3 for those between 18-21.¹ It’s increased periodically by the government to help people maintain a reasonable standard of living.

In 2016, the government introduced the national living wage. This is higher than the national minimum wage and, as of the 1st April 2024, you're entitled to it if you’re over 21.¹  

The national minimum wage increase

As of the 1st of April 2024, the national minimum wage will increase. This is the minimum amount per hour that employers must pay employees.  Of course, employers can choose to pay a higher hourly rate.

• Anyone over 21 will see an increase of £1.02, taking their hourly wage from £10.42 to £11.44
• Those aged 18-20 will see an increase of £1.11, moving their hourly wage from £7.49 to £8.60
• Anyone aged 16 or 17 will get a £1.12 increase, giving them an increase from £5.28 to £6.40 per hour¹

Interestingly, the government has said that this increase means the national living wage is two-thirds of the median hourly pay for people over 21. It’s been a long-term goal for them.

What the wage increase means to you

Naturally, you’ll be better off as you’ll be earning more money per hour. However, if you’re over 21 and in full-time employment, you won’t see £1.02 per hour more in your pay packet. You’ll still need to pay tax and NI on this. At the basic rate, that’s 20% tax and 8% NI.  In other words, your £1.02 per hour pay rise becomes £0.74. For a 40-hour week that’s an additional £29.60.

The real living wage

The real living wage is set by the Living Wage Foundation charity and illustrates the amount they believe people need to earn to live comfortably. There are two different rates, one for London and one for the rest of the UK.

For the London area, it is set at £13.15 per hour, while the remainder of the UK is £12 per hour.¹ However, employers are not legally required to pay this wage. The charity created it to illustrate what wage should be paid if wages kept up with inflation.  In other words, the bigger the gap between the national living wage and the real living wage, the poorer you’ll be in real terms. The difference is surprising. An employee on the real living wage, not based in London, would earn £3,081 more per year than an employee on the national living wage!

The real living wage rose by 21.2% between September 2021 and September 202 whilst inflation rose by 17.4%.¹ The national living wage didn’t keep up with inflation. The fact that employers are only obliged to pay the national living wage is why one in eight jobs pay less than the real living wage. It’s also why, despite wage increases, you’re worse off each year.

Sources

1. https://www.bbc.co.uk/news/uk-politics-48445674

All the information in this article is correct as of the date of publishing. The opinions expressed in this publication are those of the authors Euxton Mortgage Market. The information provided in this article, including text, graphics and images does not, and is not intended to, substitute advice; instead, all information, content and materials available in this article are for general informational purposes only. Information in this article may not constitute the most up-to-date legal or other information.

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April 2024