‘Slap in the face’ warning issued over 85p wage increase from April | Personal Finance | Finance
Small business owners across the UK have hit out at Chancellor Rachel Reeves after minimum wage increases were announced this week.
The Government has committed to increasing minimum wages between 44p an hour and 85p an hour following recommendations made by the Low Pay Commission (LPC). But some businesses say this increase, which is 85p per hour extra for those aged 18-20 and 50p per hour for those aged over 21, is “another slap in the face” following the increase to employer National Insurance announced in last year’s Budget. The pay boost will see the National Living Wage rise from £12.21 to £12.71 per hour for eligible workers aged 21 and over from April 2026, which the government said will increase gross annual earnings for a full-time worker on the rate by £900.
The National Minimum Wage rate for 18 to 20 year-olds will rise by 8.5% from £10 to £10.85 per hour, narrowing the gap with the National Living Wage, and 16 to 17 year-olds and those on apprenticeships will see rates go up by 6% from £7.55 to £8 per hour.
The full list of rates announced by the government are as follows:
- National Living Wage (21 and over): NMW Rate £12.71 – Increase (£) 50p – Increase (%) 4.1
- 18-20 Years Old Rate: NMW Rate £10.85 – Increase (£) 85p – Increase (%) 8.5
- 16-17 Year Old Rate: NMW Rate £8.00 – Increase (£) 45p – Increase (%) 6.0
- Apprentice Rate: NMW Rate £8.00 – Increase (£) 45p – Increase (%) 6.0
- Accommodation Offset: NMW Rate £11.10 – Increase (£) 44p – Increase (%) 4.1
Kate Allen, Owner at Kingsbridge-based Finest Stays, said small businesses will struggle to take the hit when the new rates take effect next April.
She said: “This is yet another slap in the face for SMEs (Small to Medium-sized Enterprises). We’re still reeling from the National Insurance hike, and now the government expects small businesses to absorb another costly, ill-judged policy.
“Raising the minimum and living wage is completely detached from the reality on the ground, where finances are stretched to breaking point and hiring is already frozen.”
Justin Moy, Managing Director at Chelmsford-based EHF Mortgages, claimed up to 85p an hour hikes to the living wage and minimum wage will fuel inflation.
He added: “This is great for the teenagers and those already on minimum wage, but the number of roles for the young part-timers has significantly fallen away, as businesses wrestle with both wage and NI increases over the past two years, against an uncertain background of retail sales and a slowing economy.
“The saving grace is that many of this population still live with parents and family, and will do for some time, looking at the latest first-time buyer data. Businesses are being told to pay up yet again, and this will just fuel inflation yet again.”
The Government said the wage increases will benefit a total of 2.7 million young and older workers, adding that the change will see those on low incomes “properly rewarded for their hard work”.
Baroness Philippa Stroud, LPC Chair, said: “The recommendations published today are a product of diligent study of the evidence, careful reflection and significant negotiation. Our advice balances the government’s ambitions with the need to protect the economy and labour market, with rates that are fair and realistic.
“In our discussions this year with workers and employers alike, it has been clear that no one is having an easy time. Despite sustained real increases in the minimum wage, low-paid workers are still challenged by the cost of living crisis. At the same time, employers, particularly small businesses, are under real pressure, exacerbated by this April’s National Insurance changes.
“While GDP growth over the past year has been mixed and the labour market has softened, our judgement is that the recent NLW increases have not had a significant negative impact on jobs.”
