When will the minimum wage rise to £12.20 and who can claim it?

Rachel Reeves will reportedly use her budget this week to push for an above-inflation increase in the minimum wage.

Ministers are also reportedly considering eliminating the minimum wage gap between people under and over 21, potentially boosting pay for younger workers.

However, there are concerns that the increase, combined with other tax changes, could put undue pressure on businesses already struggling with costs.

How much will the cost of living increase?

Several sources said the country’s cost of living could rise by more than 6 percent in Wednesday’s budget.

The current rate for over 21s is £11.44 per hour, but according to Times, this amount is expected to increase to around £12.20. The exact figure will be approved in the budget.

This could mean a full-time minimum wage worker could increase their pre-tax earnings by almost £1,600.

This new rate will apply from the beginning of the next financial year, i.e. will come into force on April 1, 2025.

The Low Pay Commission, which advises the government on the country’s living wage, said in September it expected the level to rise to £12.10, but stronger income growth has contributed to an even larger increase.

Ministers are reported to have told the body they want to go beyond the current target of ensuring basic pay does not fall below two-thirds of median earnings.

Who will receive the new living wage?

Currently, the National Living Wage is only paid to those aged 21 and over, with a separate National Minimum Wage applying to apprentices or those under this age.

The national living wage is £11.44, while those aged 18 to 20 receive £8.60 and pupils and children under 18 receive £6.40.

However, the government is reportedly planning to introduce a new “adult wage” in the future, which will close the gap between younger workers and their older colleagues.

It is not expected to be announced in Wednesday’s Budget, but Reeves is understood to be planning to increase the minimum wage for under-21s by more than 6 percent to close the gap between the two rates.

Some employers also pay the Real Living Wage, a rate set by the Living Wage Foundation, which claims to take into account the “actual cost of living”.

Although the rate is entirely voluntary, it is currently available to around half a million people working for more than 15,000 employers.

The Living Wage Trust recently recommended that the rate should be £12.60 from next year, increasing to £13.85 for London residents.

What impact could the new wages have on business?

Some business organizations have expressed concern that raising the minimum wage above the rate of inflation could put undue financial pressure on employers.

Mo Razzaq, national president of the Federation of Independent Retailers (FED), said in September: “Small independent retailers are the backbone of their communities and as responsible employers we want to ensure we pay employees a fair wage.

“But raising the National Living Wage to £12.10 would be too big a step. As well as increasing pay for our staff, we have to pay more for national insurance and pensions at a time when many other costs, including energy, are rising.”

These concerns are compounded by reports that the Chancellor is also considering increasing employers’ National Insurance contributions in his Budget on Wednesday.

But Paul Novak, general secretary of the TUC, said: Times that the Low Pay Commission panel “clearly has faith that employers can cope with the pay rise”.

“At a time when the cost of living is still very high, the lowest paid people would really benefit from a decent increase in the minimum wage. We know that low-wage workers spend most of their money in their local economy. Therefore, any increase in their purchasing power will also benefit local firms,” he added.

“Every time the minimum wage is raised, there are voices that predict it will lead to higher unemployment. They get it wrong every time.”