The main recommendations put forward by the Low Pay Commission concern the rates of the national minimum wage.
The commission has recommended that the adult hourly rate of the national minimum wage should increase from £6.50 to £6.70. The commission has recommended increasing the development rate, which covers workers aged 18 to 20 years old, from £5.13 to £5.30 and increasing the rate for 16 to 17-year-olds from £3.79 to £3.87. It recommends that the apprentice rate should increase from £2.73 to £2.80. It is recommended that these changes take place in October 2015.
The commission has also recommended that the accommodation offset increases from the current £5.08 to £5.35 in October 2015.
The Government accept the rate recommendations on the adult and youth rates, and on the accommodation offset, but have concluded that the apprentice rate should be £3.30.
Government’s response to individual recommendations in the Low Pay Commission’s 2015 report.
National minimum wage rate recommendations
We recommend that the adult rate of the national minimum wage be increased by 3%, or 20p, to £6.70 an hour, from 1 October 2015.
We recommend an increase of 3.3% in the youth development rate to £5.30 an hour; an increase of 2.2% in the 16 to 17 year-old rate to £3.87 an hour.
The Government accept the national minimum wage rate recommendations.
We recommend an increase of 2.6% in the apprenticeship rate to £2.80 from 1 October 2015.
The Government reject the national minimum wage rate recommendations.
The Government propose to increase the national minimum wage for apprentices by 57p an hour to £3.30. This is the largest ever increase in the national minimum wage for apprentices and will halve the gap with the age rate for 16 to 17-year-olds, currently £3.79 an hour.
Increasing the apprentice rate to £3.30 will equate to a 21% increase in the statutory minimum hourly rate for those apprentices aged under 19 and for those aged 19 and over and in the first year of their apprenticeship. We know that many of these apprentices will already be paid considerably more than the current apprentice rate and that the average hourly pay for level 2 and level 3 apprentices is £6.79. Approximately 67,000 apprentices will be affected by the increase, with an estimated cost to business of £93 million.
We recommend that the accommodation offset be increased by 3.5%, to £5.08 a day, from 1 October 2015.
The Government accept the accommodation offset recommendations.
Apprentice rates—rate for higher apprentices
We recommend that the apprentice rate should not apply to higher apprentices.
The Government accept the recommendations that the apprentice rate should not apply to higher apprentices. From October 2015, these apprentices will be entitled to the age-appropriate rate of the NMW.
Apprentice rate—structure and proposal for simplification
We recommend that the Government commit to further consultation on the proposed approach before any legislative change is made.
The Government accept the recommendations to further consult on proposed approach to the apprentice rate structure. The Government will consult on reforming the structure of the apprentice rate for 2016.
A copy of the Government’s response will be placed in the Libraries of both Houses. Attachments can be viewed online at: http://www.parliament.uk/ writtenstatements