W22 - Minimum wage set to rise above £5

The Department of Trade and Industry (DTI) has announced (25 February 2005) that the National Minimum Wage (NMW) will increase to £5.05 an hour from October 2005, with an increase in the youth rate to £4.25 an hour.

The adult rate of the minimum wage will increase from £4.85 to £5.05 in October 2005 - in line with average earnings - with a further six per cent increase to £5.35 in October 2006.

The rise is in line with the recommendation of the Low Pay Commission, and takes the minimum wage, in 2006, to almost 50 per cent above its 1999 introduction rate.

The latest increases will extend coverage of the minimum wage to 1.3 million workers in October 2005 and 1.4 million workers in October 2006.

The Government has also:

* agreed that the Low Pay Commission should review the 2006 rates, taking into account the latest economic conditions;

* agreed that the youth rate, which applies to 18-21 year olds, should rise to £4.25 in October 2005 and £4.45 in October 2006;

* agreed that the Commission should review the operation of the 16-17 year old rate and report in 2006;

* announced that it will keep the issue of whether to put 21 year old workers onto the adult rate under review; and

* agreed that the Commission should review the minimum wage treatment of benefits in kind including where those benefits are offered as part of a salary sacrifice arrangement.

 

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