• Chancellor unveils rise in minimum wage ahead of budget

  • 14 Mar 2016
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New rate will affect under-25s from October; ‘Help to Save’ scheme will encourage lower-paid employees to put money aside

The government has announced increases in the minimum wage paid to under-25s, which will see workers aged between 21 and 24 picking up an extra 25p per hour.

In a move that will be formally unveiled in Wednesday’s budget, the rate for the 21-24 age bracket will rise to £6.95 per hour. Those aged 18 to 20 will see the minimum wage grow by 4.7 per cent to £5.55 an hour (currently £5.30) and for 16-17 year olds it will reach £4 an hour, up from £3.87 today.

The measures will take effect from October 2016. The minimum wage has risen consistently since 2010, so a further rise had been expected this year, but the announcement comes less than three weeks before the introduction of the new national living wage (NLW) of £7.20 for over-25s. There have been suggestions that employers in some sectors have focused on recruiting under-25s in anticipation of the new higher rate. 

The government has also announced a ‘Help to Save’ scheme, which aims to increase the financial security of low earners by offering a top-up if they are able to put money aside.

With research showing that almost half of adults in the UK have less than £500 in savings for emergencies, the scheme is open to anyone in work and in receipt of Universal Credit with minimum weekly household earnings equivalent to 16 hours of the NLW or Working Tax Credits. They will be able to save up to £50 per month and will receive a 50 per cent bonus after two years, worth up to £600.

Account holders can then choose to continue saving with the scheme for a further two years and receive another £600 bonus. This will see them earn a savings pot worth up to £3,600 after the full four years of the scheme, including £1,200 from the government.

Charles Cotton, performance and reward adviser at the CIPD, welcomed the programme but said there were questions about how it would be implemented: “Good financial wellbeing flows through to improved workplace performance and confidence, which is good for employers and employees if staff are more financially resilient and able to stretch their pay packet further. It also means employees are less likely to go down the payday loan route.

“What the government has announced is all part of the same jigsaw puzzle of financial wellbeing. I suspect that the Help to Save scheme will be delivered through the workplace, but will all employers be required to offer it? How much of an extra burden on employers will it be?”

Danny Cox, chartered financial planner at Hargreaves Lansdown, added: “Help lower earners to build a rainy day fund and a reduction in the reliance on payday lending should follow. Savings incentives clearly work; however, the potential beneficiaries of these schemes will be the most hard pressed to get off the mark.”

The government has also introduced a national mentoring campaign to assist struggling teenagers, which will be managed by The Careers & Enterprise Company.

Once established, 25,000 young people a year who are deemed at risk of underachieving or dropping out of education before they sit their GCSEs will receive extra support from high-flying professionals.

The campaign will focus on careers-related mentoring programmes delivered to young people either individually or in small groups. A fund will launch in June, with funding awarded in the autumn.

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  • The NMW advice for implementation in October has always come out in March? I was rather wondering when the NLW notification will appear, will this be on the same pattern as NMW i.e. March in which case we'll not have to wait until March 17 or will this be later in the Year in an October/November budget statement for implementation in the following April each year? Who knows?