Government publishes updated remit for Low Pay Commission ahead of 2025 NLW recommendations

The Department for Business and Trade have published an updated remit for the Low Pay Commission, following the change in Government after the General Election.

Every year, the Low Pay Commission gather evidence from businesses, workers and other interested parties about the impact of current National Living Wage rates, which is then followed by a recommendation to Government on what the following years’ rates should be. The Low Pay Commission’s decision-making process is focused by the remit that is given to it by the Government.

The updated Low Pay Commission remit covers the following areas:

• The Government has asked the Commission to ensure that the rate for workers aged 21 and over does not fall below two thirds of median earnings
• The Low Pay Commission has been tasked with recommending a separate rate for 18-20 year olds in 2025, with a view to removing age bands for the National Living Wage rate in the future
• The Government has asked the Commission to consider the impact of its recommended rate on business, the labour market, competitiveness, the wider economy, and the cost of living, as well as inflation trends.

In written and oral evidence submitted by ACS to the Low Pay Commission this year, ACS has highlighted the difficult decisions that retailers are already having to make in response to rising wage rates, including:

• Reducing the amount they invest in their business (53 per cent of stores)
• Increasing prices (53 per cent of stores)
• Reducing staff hours (47 per cent of stores)
• Taking lower profits/absorbing the costs (47 per cent of stores)

ACS chief executive James Lowman said, “It is essential that the Commission considers the impact of rising wage rates on both sides of the labour market, so we are encouraged by the inclusion of business impact within the remit this year.

"Our members are already telling us that wage rates are having a negative impact on investment, which will make it harder to trade, diversify and remain competitive in the future. Further increases beyond the two-thirds of median earnings threshold will only intensify the problems facing retailers and stifle wider economic growth.”

The rate of the National Living Wage has increased from £8.91 per hour in 2021-22 to £11.44 per hour in 2024-25, an increase of over 28 per cent in the last three years which has brought the National Living Wage rate up to the previous Government’s target of two-thirds of median earnings.

Measures pledged in the Labour manifesto ahead of the 2024 General Election included a removal of the age bands for the National Living Wage so that they apply for anyone over the age of 18, and a consideration of the cost of living within the remit of the Low Pay Commission, the latter of which has now been delivered.