National minimum wage 2023: pay rises for 1.6 million workers

From tomorrow (1 April 2023), all rates of the national minimum wage, including the national living wage, will increase.

The latest figures from the Low Pay Commission reveal there were about 1.6 million workers paid at or below the minimum wage in April 2022, around 5% of all UK workers. This compared to 1.5 million jobs paid at or below the NMW in 2015, before the introduction of the national living wage.

While the rises will benefit many low paid workers, more than 12,000 businesses were already paying the higher real living wage in recognition of the high cost of living and in a bid to retain workers. The real living wage, set by the Living Wage Foundation, is £10.90 in the UK, and £11.95 in London.

The Low Pay Commission estimates that 45% of all jobs paying at or below the minimum wage are in retail, hospitality, and cleaning and maintenance occupations.

The Living Wage Foundation has pointed out that a UK worker earning the national living wage would need an extra £936 each year to bring their income in line with the real living wage. This difference amounted to more than three months of food bills (14 weeks) or 11 weeks of housing and energy costs, according to national averages.

It added that with the cost of living in the capital higher than the rest of the UK, a worker living in London and being paid the government’s national living wage would need to find £2,983.50 extra to bring their earnings in line with the London living wage. This difference represents over nine months of food bills (38 weeks), or over five months of housing and energy costs (21 weeks).

Katherine Chapman, director of the Living Wage Foundation, said: “This significant rise in the national living wage is a welcome boost to ease some of the pressure inflation continues to pile onto low-paid workers. It remains lower than the real living wage which is based on the cost of living – but the good news is we have seen record numbers of employers signing up to pay the higher real Living Wage to protect their lowest paid staff during these tough times.”

For labour-intensive businesses, however, the rises in the National Minimum Wage could mean they will need to become more productive to survive.

According to Inverto, Boston Consulting Group’s supply chain specialist, the rise in labour costs “will hit these companies and their suppliers at the worst possible time, when margins are already being stretched to their limit following rising raw material and commodity prices over the last two years”.

Inverto managing director Sushank Agarwal said more firms needed to invest in “smarter” ways of working, which entailed more use of automation and the upskilling of workers. He said: “Companies can obtain more value from their workers by ‘cross training’ them, enabling workers to be flexibly deployed across multiple tasks. For example, cleaning/catering staff could be trained to do regular equipment maintenance, allowing the business greater flexibility of deployment, and even creating potential for pay rises for existing staff – an important form of support during the cost of living crisis.”

“Investing in staff training will not only improve productivity but also agility for workers to have wider job opportunities, making the employer more attractive to potential new hires.”

Agarwal added: “The minimum wage rise is very daunting for many UK businesses that are already struggling financially. Even so, they should try to use this moment as an opportunity to invest in becoming more productive in the long run, collaborating closely with the key suppliers.”

According to ONS figures, UK productivity (measured by GDP per hour) has only increased by about 5% since 2008, which lags well behind other western economies such as France, Germany and the US. In fact, UK productivity was 20% less than US productivity in 2021.

Sign up to our weekly round-up of HR news and guidance

Receive the Personnel Today Direct e-newsletter every Wednesday

Email(Required)

OptOut

From time to time, we will send you emails about selected products, events and services from Personnel Today and OHW+ - but you can choose to opt-out at any time. If you do not wish to receive these emails, please tick this box.

Email

This field is for validation purposes and should be left unchanged.

Δ

The UK’s national minimum wage was in 2021 the eighth highest adult minimum wage out of 25 OECD countries after taking into account differences in the cost of living, according to the most recent ONS report on the subject

Latest HR job opportunities on Personnel Today

Browse more human resources jobs