National Minimum Wage 2022: what rates have increased to and what is the National Living Wage

More than 2 million people will see their pay rise as increases to minimum wage rates take effect.

The Government said around 2.5 million people will benefit from the largest ever increase to the rates, putting £1,000 a year more into full-time workers’ pay packets.

The rise comes amid a cost of living crisis that could leave workers paying 7% more for goods.

However, it has been questioned whether the increase will be enough to ease the pressure of soaring inflation.

Here’s everything you need to know about the National Minimum Wage and National Living Wage rise from who it affects to how much pay will go up by.

What are the new hourly rates?

The National Minimum Wage is the minimum pay per hour almost all workers are entitled to.

From Friday (1 April) the National Minimum Wage hourly rate for people aged 21-22 rose to £9.18 an hour, up from £8.36. Those aged 18-20 saw rates increase from £6.56 to £6.83. For people age 16-17 rates have gone from £4.62 to £4.81. The apprentice rate went up from £4.30 an hour to £4.81.

Meanwhile, the National Living Wage, which is higher than the National Minimum Wage is paid to workers over the age of 23 years old. Its rate has risen by 6.6% from £8.91 to £9.50 an hour.

Tory ministers had previously claimed they would raise the minimum rate to £10.50 an hour and expand the eligibility to over-21s by 2024.

Ministers pledged future rises would be pegged to two-thirds of median earnings - higher than the previous 60% target.

How have wages been affected by inflation?

Recent labour market data shows how wage rises are struggling to keep up with spiralling inflation.

Office for National Statistics (ONS) data shows wage growth in the UK is already far behind rising prices.

Between October and December 2021, average weekly pay across Britain fell by -1.2%.

When adjusted for inflation, regular pay fell on the year at -0.8%.

The data shows how wages are struggling to keep up with the rising cost of living.

Inflation is expected to increase above 7% this year with the Bank of England warning that this is going to hit workers.

"These figures confirm working people still face a fragile recovery in the face of a growing cost of living crisis and spiralling inflation," said Pat McFadden MP, Labour’s shadow chief secretary to the Treasury, in response to the data.

What has been said about the minimum wage rise?

Business Secretary Kwasi Kwarteng said: “We have never been more determined to make work pay, and by providing the biggest cash increase ever to the national living wage we are giving a boost to millions of UK workers.

“While no government can control the global factors pushing up the cost of everyday essentials, we will absolutely act wherever we can to mitigate rising costs.”

The Government also announced it will be launching a communications campaign in the coming weeks to help increase understanding among living wage earners around the wages they are legally entitled to, as well as steps they can take if they are concerned they are being underpaid.

Bryan Sanderson, who chairs the Low Pay Commission, said: “Workers on the minimum wage care for our elderly and sick, harvest and deliver our food, and do a multitude of other tasks which help us all.

“Many public sector workers including for example teaching assistants will also shortly be included. They all deserve to be properly remunerated and respected as key members of our society.”

Nye Cominetti, senior economist at the Resolution Foundation, said: “This is the fourth biggest rise in the 23-year history of the minimum wage, though it is unlikely to be enough to keep up with rising prices.

“The UK has one of the most ambitious minimum wages in the world. But as the debacle at P&O ferries has shown, better treatment for low earners doesn’t begin and end with the national living wage.

“Higher wage floors should be supplemented with greater security at work, and proper enforcement of the law that provides a sufficient deterrent to unscrupulous employers.”

What is the cost of living crisis?

Britain’s cost of living crisis has seen a surge in prices including higher household bills as well as rising petrol, energy, and food costs.

These prices are set to get worse this spring following the energy price cap rise.

This will add around £700 on average to annual gas and electricity charges for millions of customers.

Matthew Percival, director for people and skills at the Confederation of British Industry (CBI), said: "The good news is that the UK economy is continuing to create jobs.

"The bad news is that businesses are struggling to hire and pay is failing to keep up with inflation."

"Bold action is needed to go for growth, with steps to address skills and labour shortages," he added.

How has the Bank of England responded?

The Bank has tried to combat accelerating price growth by increasing interest rates to 0.5%.

But if employees ask for big wage increases to match the cost of living, its task could be made much more difficult.

Previously, the Bank of England governor Andrew Bailey was criticised after suggesting that employers should think twice about giving their staff pay rises.

According to the ONS most recent figures, job vacancies hit a new record high of 1.3 million while unemployment fell to 4.1% - only slightly above pre-pandemic levels.