The government has changed the remit of the Low Pay Commission (LPC) to ensure it considers the the cost of living when recommending minimum wage rates.
The change is part of government plans to secure a genuine living wage for employees.
Pay bands related to age, deemed discriminatory, are also set to be removed.
Vital steps
Business and trade secretary Jonathan Reynolds said: “For too long working people have faced the worst of the cost of living crisis, but this government is taking bold action to address it and make work pay.
“The new remit to the LPC is the first of many vital steps we will take to support more people to stay in work and improve living standards.”
Reynolds and deputy prime minister Angela Rayner have also instructed the LPC to narrow the gap between the minimum wage rate for 18–20 year olds and the national living wage as part of the move to a single adult rate.
Genuine living wage
Chancellor Rachel Reeves said economic growth was the government’s first mission, adding that: “The new LPC remit is an important first step in getting people into work and keeping people in work, essential for growing our economy, rebuilding Britain and making everyone better off.”
She said that the advent of the minimum wage has been one of the most effective and successful policy interventions of the last 25 years.
“This announcement is the next step in achieving the promise of a genuine living wage for working people,” she added.
End of age bands
TUC general secretary Paul Nowak said: “Hard work should pay for everyone. These are significant first steps towards making the minimum wage a real living wage and will make a difference to millions. We welcome the government’s decision to ask the LPC to be more ambitious next year and into the future.”
Nowak said the TUC also supported government commitments to ending discriminatory age bands for minimum wage workers.
“Young people face the same cost of living pressures as other adult workers and will welcome their pay being brought into line.”
Inflationary pressures
IKEA UK & Ireland chief executive and chief sustainability officer Peter Jelkelby said: “People are at the heart of IKEA’s success, and we recognise the challenges they face from inflationary pressures and rises in the cost of living. IKEA is committed to paying a fair, sustainable rate of pay based on the true cost of living and what’s happening in the wider economy.”
The employer has been a member of the Living Wage Foundation since 2016 and is the largest accredited retailer, he said.
“Our business relies on a skilled, engaged, and committed workforce, so ensuring that living wages reflect the true cost of living is a powerful route to providing security and stability for our co-workers and their families.”
Micro-business challenges
Emma Jones, founder and CEO of small business support platform and membership community Enterprise Nation, said: “Small businesses are the backbone of our economy, and we know they are facing unprecedented pressures. We wholeheartedly support the principle of a living wage for all workers and look forward to continuing to work with the government to recognise the unique challenges faced by micro-businesses.”
She said the aim was to create an environment where both businesses and workers can thrive and that her business would continue to advocate for a balanced approach that will ensure the survival, growth and success of small enterprises.
The changes to the LPC’s remit are part of realising the new government’s plans to ‘make work pay’, which includes an ambitious agenda to ensure workplace rights are fit for a modern economy, empower working people and deliver economic growth.
