National Minimum Wage (Amendment) Regulations 2025

Lord Sikka Excerpts

Monday 17th March 2025 Grand Committee

[The Minister of State, Department for Business and Trade and Treasury (Baroness Gustafsson) (Lab)]

My Lords, the purpose of these regulations, which were laid before the House on 4 February, is to enact the annual increases to the national living wage and national minimum wage rates. After the parliamentary passage of these regulations, minimum wage rates will go up on Tuesday 1 April 2025. The headline national living wage will increase by 6.7%, from £11.44 to £12.21 an hour, a real-terms pay rise that will benefit and protect millions of workers. This year, the national minimum wage rate for those aged 18 to 20 will increase by £1.40 from £8.60 an hour to £10.00. This is a record increase, worth 16.3% on an hourly basis, and it is also a significant step towards achieving the Government’s ambition to extend the top rate, currently mandatory for those aged 21 and over, to all adults.

We look forward to hearing additional detail on this point from the Low Pay Commission once it has completed its consultation on the trajectory and pace of this equalisation. In the meantime, we will also deliver substantial increases to the statutory minimum wage rates for younger workers and apprentices. The hourly minimum wage rate for workers aged above school-leaving age but under 18 will increase from £6.40 to £7.55, an increase mirrored for the apprentice rate, which is payable to apprentices aged under 19 or others in the first year of their apprenticeship. Finally, we will also increase the daily accommodation offset rate from £9.99 to £10.66.

At this point, I want to extend my thanks to the Low Pay Commission. The new rates are based on the recommendations made by the LPC, which has demonstrated, as ever, its diligence, thoroughness and adaptability. On behalf of the Government, I thank the noble Baroness, Lady Stroud, and her fellow commissioners, as well as all the officials involved at the commission for their continued hard work, particularly in a year where they responded to an updated remit after this Government took office. The Government are also grateful to the bodies that promote and enforce the minimum wage across the UK. In addition to ACAS, which ensures employment disputes are resolved as promptly as possible, enforcement and compliance officials at HMRC ensure that the rates we are enacting today will have a real-world effect, educating workers and employers, upholding the law and ensuring that any money due is repaid to the workers who have earned it. Indeed, since the minimum wage was introduced, HMRC and its predecessor bodies have overseen the repayment of more than £186 million to 1.5 million workers and the issuing of more than £100 million in financial penalties.

The Government are committed to building on this and bolstering the enforcement of employment rights through the creation of the fair work agency, which will include, among other areas, enforcement of the national minimum wage. The new body will provide better support for employers to comply with the law, but it will also have powers to take tough action against the minority who deliberately flout it.

In the meantime, the Government will continue to fund minimum wage enforcement through HMRC, and we will also publish a new naming list in due course of those businesses that have failed to pay their workers the minimum wage, showing that there are consequences for employers who flout the law.

This year’s uplift to the national living wage will deliver a gross pay rise of £1,400 for a full-time worker on the rate, while a full-time worker aged between 18 and 20 will see a gross rise of £2,500. It is worth emphasising that the 2025 national living wage is expected to have the highest real value in the history of the UK’s minimum wage, 78% higher than the main adult rate when the national minimum wage was first introduced in 1999. The national minimum wage rate for 18 to 20 year-olds will be equal to 82% of the national living wage in 2025, similar to the relative value when the national minimum wage was first introduced in 1999, and compared to 75% in 2024. In all, we estimate that more than 3 million workers will benefit directly from the increases, with the potential for millions more to receive an indirect pay rise as employers preserve pay differentials.

This year’s uprating is a crucial step towards delivering our manifesto commitment to a genuine living wage for all adult workers. This is a Government who are ambitious in their agenda for working people and serious about taking the necessary steps to deliver on it. We are delivering this through a direct, real-terms pay increase for millions of workers. We have also brought forward our landmark Employment Rights Bill, and we continue to work across the board alongside trade unions, employers and other stakeholders both to deliver on the plan to make work pay and to realise the biggest upgrade of workers’ rights in a generation.

Accordingly, the Government will issue in the coming weeks a new remit to the Low Pay Commission, asking it to recommend minimum wage rates to apply from April 2026. I commend this instrument to the Committee.

[Lord Sikka (Lab)]

My Lords, I welcome the increase in the national minimum wage, although most of its real value has already been eroded by hikes in the price of energy, water, housing, transport, internet, food, council tax and much more. I shall speak to two particular concerns.

First, I am concerned about the denial of the headline minimum wage rate to workers below the age of 21. The under-21s do not pay lower rates of income tax and national insurance, nor do they pay a lower price for housing, food, shoes, clothes, transport, medicines, internet, and other goods and services. However, they are condemned by law to receive a lower wage. The under-21s are paid a lower wage rate but the product of their labour does not sell at a lower price. This enables many an employer to profiteer. The denial of the full minimum wage has relegalised exploitation.

Over the years, the typical government response has been that low wages preserve employment opportunities for young workers, yet I meet young people who are working longer hours and holding down multiple jobs simply to collect a decent wage and to make ends meet. This cannot be good for their health; indeed, it will create pressures somewhere else. Young people on low wages are trapped in low-paid jobs. I have met many who would like to undertake part-time education in order to further their opportunities but cannot because they simply do not have the resources. I therefore urge the Government to abolish the lower rates of the minimum wage and to alleviate poverty.

Secondly, I am concerned about the enforcement of the statutory minimum wage. The annual reports published by HMRC show a steady parade of companies that fail to pay the required wage. Last year, 524 employers were named for failing to pay £16 million in wages to 172,000 workers. Over the years, the culprits have included companies such as Argos, easyJet, Estée Lauder, Greggs, Marks & Spencer, Moss Bros, WHSmith and many others. None of these offenders ever forgets to pay the agreed wage rate to their executives but, somehow, they always forget to pay their workers a statutory minimum wage.

Although the recovery of unpaid wages is highly commendable, the persistence of non-payment suggests that there are systemic problems and that the penalties are not high enough. The International Labour Organization’s Convention No. 81, signed by the UK, recommends at least one inspector per 10,000 workers to monitor compliance with workers’ rights. The UK has less than 0.4% of the benchmark requirement, and employers can expect an inspection once every 500 years. Can the Minister explain why the Government are not meeting the ILO requirements? There are potential fines of up to 200% of the underpayment of the minimum wage, and a maximum of £20,000 per worker, but I could not find anyone who has actually faced this maximum penalty. Can the Minister say when the maximum penalty was last levied?

The persistence of offences suggests that penalties are simply not effective. I urge the Minister to consider a minimum penalty, which should be equivalent to the remuneration of the entire board of directors, and at least 50% of it must be paid by directors personally. This would deal with the business scale problem and incentivise directors to pay the minimum wage. It would also improve their memory.

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[Baroness Gustafsson (Lab)]

I thank the noble Lord. I talked about the additional rights and enforcing the wider roles and rules of the domestic agency, but on how that will be impacted operationally, as well as the interface with HMRC, I will write to the noble Lord, Lord Fox, with some details on exactly how that will be undertaken.

[Lord Sikka (Lab)]

My Lords, perhaps I, too, could have one more bite. I referred to the penalty situation. The one we have at the moment enables directors to gain because the chances of all companies being inspected are very low. If they get away with it, they are quids in because the bottom line means that they will get a higher bonus and remuneration. If they are caught, there will be a penalty on the company, and they do not bear any personal penalties. Will the Government change that and make sure that directors personally pay at least half the penalty, as I suggested?

[Baroness Gustafsson (Lab)]

There is a lot of conversation about enforcement. We talked about the 200%. There is currently no legislation about directors’ personal accountability, but I am more than happy to follow up with the noble Lord on the specifics of what that would look like.