Alyssa Withers | 26 Apr 2024

What is in store for the National Living Wage in 2025?

The Government has published a new remit for the Low Pay Commission (LPC), the independent body that advises it on the National Living Wage (NLW) and National Minimum Wage (NMW). Unusually, the latest remit covers a single year, and aims to maintain the NLW at a level equivalent to two-thirds of median earnings in 2025. This builds on the LPC’s target for the period from 2020 to 2024, over which the NLW rose from 60% to 66% of median earnings and was expanded to cover workers aged 21 and 22.

The LPC’s current projected rate for the NLW in 2025 looks to be within the range of £11.61 and £12.18, with a central estimate of £11.89. This represents an increase of 3.9% (45p) on the current rate of £11.44 – a significantly smaller increase than those seen over the last two years (92p/9.7% in 2023 and £1.02/9.8% in 2024). This is because previous rises in the NLW involved relatively large step changes in its value relative to median earnings, in order to meet government targets.

In addition, the Government has asked the LPC to monitor the levels of each of the NMW rates (under-18 and 18-20 age groups and apprentice rates) and recommend the highest possible rate for each group. The LPC has also been asked to continue to gather evidence on pay for low-paid workers with protected characteristics such as disabled workers, women, and those from ethnic minorities and finally, to gather evidence on how the NMW has contributed to the Government’s  'Levelling Up' mission, which was designed to improve pay and productivity across the country.

In contrast with previous four-year targets for the NLW, the current remit is limited to a single year. This could be due in part to the fact that this is an election year, with the possibility of a change in administration. The single-year remit therefore leaves any significant changes to the level or make-up of the legal floor until the following year, by which point a new administration (of either stripe) will have been elected.