Understanding the National Wage Rate Increases: What It Means for You

The first Labour Budget since taking office was presented on the 30 October 2024, by the first female Chancellor, Rachel Reeves, in the Commons. In the Autumn Budget statement, Rachel Reeves announced that the government has accepted the Low Pay Commission’s (LPC) recommendations regarding the National Minimum Wage (NMW), including the National Living Wage (NLW). These updated rates, effective from 1 April 2025, reflect significant increases which the government says are aimed at addressing wage inequality and improving living standards across the UK. However, it’s important to note that the LPC made these recommendations to government independently, the NHBF along with its members fed in oral and written evidence about the potential impact on the sector but was not responsible for the decisions made.

What Does it Mean for NHBF Members?

Starting April 2025, the wage rates will change as follows:

How Did the LPC Reach This Decision?

The Low Pay Commission’s (LPC) decision-making process takes into account various perspectives, economic conditions, and government directives. In the lead-up to the announcement, Baroness Stroud’s letter outlined the core considerations the government asked the LPC to focus on, which include balancing fair pay with economic viability for employers and the impact on young people entering the workforce.

Here are some key points from their deliberations:

Government Considerations (Paragraph 8): The LPC was asked to strike a balance between providing a liveable wage and ensuring that wage hikes do not negatively impact employment opportunities, especially in small businesses.

Employer Sentiments (Paragraphs 13, 14, and 15): Employers expressed concerns about the impact of significant wage increases on their businesses, particularly in sectors with tighter profit margins.

Youth Wage Adjustments (Paragraphs 22 and 24): For youth wages, the LPC has opted for a step-by-step approach, significantly raising the rates for 16-20-year-olds and apprentices, reflecting the need, they say, for living wage standards at the entry-level of employment.

These considerations were pivotal in the final recommendations, with the LPC emphasising that higher wages are a priority, even if it poses challenges for some employers.

What Is the NHBF Doing About It?

The NHBF advocated a cautious approach to these wage increases, especially regarding younger workers. While NHBF specifically requested restraint in the rate hikes for youth wages, these were not fully reflected in the LPC's recommendations. In response, NHBF has urged the government to support businesses in managing these rising costs.

Notably, there has been an increase in Employment Allowance from £5,000 to £10,500 in the Autumn Budget, intended to alleviate some of the pressure on employers. However, the NHBF believes further targeted support is needed, particularly in the form of training incentives for apprentices, which were not included in the budget.

Caroline Larissey, Chief Executive of the National Hair & Beauty Federation said:

‘We asked the government for support for employers to counteract rising wages so we’re pleased that they have listened and responded with a rise in the Employment Allowance which will benefit some sector businesses, despite the rises to employers’ National Insurance contributions.

However, with 16%+ rises in the youth wage rates, there was nothing on interim support for businesses training young people. The only ‘youth guarantee’ for our sector will be that small and micro employers won’t be able to afford to take on apprentices. This makes it even more vital that Skills England is responsive to the needs of our sector and the new Growth & Skills levy channels major support to incentivise small and micro businesses training apprentices.

We will engage constructively with the consultation around business rates reform and the decision to keep at least some support through a 40% Retail business rates discount and freeze of the small business multiplier is welcome and important in the interim. The government was silent on VAT but we will continue to push for reform which is the sector’s number one issue’.

Looking forward, NHBF will continue to advocate for employer support through initiatives like Skills England and the proposed Growth & Skills levy, which we hope will provide sustained support for training and development. While the LPC has provided independent advice to the government, NHBF remains committed to representing Members’ interests and securing viable support measures for employers during these challenging times.