National Minimum Wage to Rise from October 2013

The Government has announced that the main rate of the National Minimum Wage (NMW) will rise by 12p to £6.31 an hour from 1 October 2013.

Announcing the change, the Business Secretary Vince Cable also revealed that the hourly rate for those aged 18 – 20 will increase from £4.98 to £5.03, while the rate for 16 and 17 year-olds will go up by 4p to £3.72 an hour.

The Government accepted the recommendations put forward by the Low Pay Commission (LPC), although it rejected the LPC’s proposal to freeze the minimum rate for apprentices.

Instead, Mr Cable announced that the apprentice rate, which applies to apprentices under 19, or those 19 and over in the first year of their apprenticeship, will rise from £2.65 to £2.68.

The decision has provoked a mixed response, with some business leaders describing the move as ‘illogical’ and ‘unwelcome’.

Mike Cherry, national policy chairman of the Federation of Small Businesses, said: ‘The increase in the national minimum wage is unwelcome in today’s economic climate. We understand the Government must strike a balance between boosting consumer spending and economic growth, however they must ensure the UK’s small businesses stay competitive at a time when the economy remains fragile.

‘There will be businesses that operate on thin margins, who will struggle with any increase to the minimum wage.’

His thoughts were echoed by Dr Adam Marshall from the British Chambers of Commerce (BCC), who warned that the scale of the increase would add significantly to the cost pressures on businesses.

Yet the TUC said it would have liked to have seen the Government do more to help those on lower incomes.

‘Boosting the incomes of the low-paid goes straight into the economy and wage-led growth must be part of the recovery, so we would have liked to have seen minimum wage rates go up further today, even if the Government has rightly rejected calls for a freeze,’ commented TUC general secretary Frances O’Grady.

This article was compiled by Ashley Barrowclough, Partner at Balance Accountants.

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