What is the minimum wage and how much is it?

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Waiter taking ordersImage source, Getty Images

Increases in the minimum wages UK workers can be paid come into force on 1 April, benefiting about two million people.

The new rates, which were announced in October, come as household budgets face mounting pressure because of the soaring cost of living.

How are the minimum wages changing?

The minimum wage increases take effect from 1 April:

  • National Living Wage for over-23s: from £8.91 to £9.50 an hour
  • National Minimum Wage for those aged 21-22: from £8.36 to £9.18
  • National Minimum Wage for 18 to 20-year-olds: from £6.56 to £6.83
  • National Minimum Wage for under-18s: from £4.62 to £4.81
  • The Apprentice rate: from £4.30 to £4.81

The apprentice rate applies to people aged under 19, or people over 19 but in the first year of their apprenticeship.

If apprentices are older than 19 and have finished the first year of their apprenticeship, they are entitled to the relevant minimum wage for their age group.

The minimum wage is the same across all parts of the UK.

What about the cost of living?

Since the new rates were set in October, the UK's economic picture has changed, with inflation - the measure of the cost of living - rising at its fastest rate for 30 years.

The latest inflation figure at the time of the announcement was 3.1%, but has since risen to 6.2%.

This means that despite being the fourth biggest rise in the 23-year history of the minimum wage, the new rate is unlikely to be enough to keep pace with prices, says Nye Cominetti, of the Resolution Foundation think tank.

How does the minimum wage work?

The UK national minimum wage sets out the least a worker can be paid per hour by law.

There are two types:

  • the National Living Wage applies to workers over the age of 23
  • the National Minimum Wage applies to workers above school leaving age but under 23

The levels for both - along with the apprentice rate - usually increase every April.

Any employer not paying the minimum wage can be fined by the UK tax authority, HMRC.

If you think you should be getting the minimum wage and aren't, you can complain via the HMRC website. You can also get advice from the Acas website or by calling its helpline on 0300 123 1100.

Who sets the minimum wage?

The rates are decided each year by government and based on the recommendations of an independent advisory group, the Low Pay Commission.

It bases its recommendations on the state of the economy, and considers how many people are in work, what's happening to everyone's earnings and how much they are having to pay for essentials such as food and housing.

Who benefits from the minimum wage?

The retail, care and hospitality sectors account for a large number of minimum wage jobs, although they are found in many other parts of the economy.

People must be of at least school-leaving age to be eligible for the minimum wage, and must be employed.

Workers can be part-time, casual, agency workers, piecemeal workers, apprentices, trainees, workers on probation, disabled workers, agricultural workers, foreign workers, seafarers or offshore workers, according to government guidance.

Image source, EPA

Who isn't entitled to the minimum wage?

People who don't qualify include the self-employed, company directors, volunteers, members of the armed forces, prisoners and people living and working in a religious community.

People with disabilities or those in long-term unemployment who take part in a government work programme are paid fixed amounts at different stages of the programme, which are less than the minimum wage.

Work done by prisoners is paid at a minimum of £4 a week, while students on work placements of less than a year as a required part of their studies are not entitled to be paid anything.

When was the minimum wage introduced?

The law to introduce the minimum wage was passed in 1998 by the Labour government and it came into force the following year.

It started at £3.60 for those 22 and older, and £3.00 for 18-21 year olds.

Before the minimum wage was introduced, the lowest-paid people consistently saw the slowest growth in their wages.

The introduction of the minimum wage reversed this trend, according to the Low Pay Commission.

Image source, Getty Images

Did the minimum wage cost jobs?

Before the minimum wage was introduced, there was concern that it would cost jobs, because employers would compensate for their higher wage bill by hiring fewer people.

But this didn't turn out to be the case.

There's no evidence of an overall loss of jobs linked to the minimum wage, and only weak evidence of negative impacts on some groups of workers.

What is the 'Real Living Wage'?

The voluntary "Real Living Wage" is set by the Living Wage Foundation charity.

It is currently £11.05 per hour in London, and £9.90 per hour elsewhere in the UK.

The recommended rate is intended to ensure all staff earn a wage that meets the real cost of living and covers everyday needs.

More than 9,000 employers throughout the country have signed up to the policy, covering more than 300,000 workers.