Removing the Age Limit for National Living Wage (NLW): Exploring the Latest Legislative Proposals

One of the many changes to UK employment legislation contained in the new Employment Rights Bill, which was introduced to Parliament on 10 October 2024, is a significant change to the National Living Wage (NLW), which proposes the removal of the age limit that currently restricts it to workers aged 23 and over. If approved, this change could come into effect in April 2025 as part of the government’s ongoing efforts to address wage inequality.

Although the proposal is a significant step toward wage equality, it is not yet confirmed. The Employment Rights Bill must now be debated and then approved by each House of Parliament, then receive Royal Assent. This article explores the current NLW framework, the details of the proposed changes, and the implications for both workers and employers should the proposal become law in 2025.

The Current National Living Wage Framework

As of April 2024, the NLW rate is set at £11.44 per hour for workers aged 23 and over. Workers aged 18-22 are currently paid less than the NMW, with rates varying based on age. For example, those aged 18-20 receive £8.60 per hour, while workers under 18 are paid £6.40 per hour.

This tiered approach to wages has been criticised for creating inequality, as younger workers often face the same living costs as their older colleagues but receive lower wages. The proposed legislation aims to address this disparity by extending the NLW to all workers aged 18 and above.

Proposed Changes to the NLW

The proposed removal of the NLW age limit would extend the current NLW rate to all workers aged 18 and over. Should this change take effect in April 2025, younger workers who currently earn less under the NMW would see a significant increase in their hourly pay.

The final decision on whether the proposal becomes law will depend on consultations and government timelines, with the Low Pay Commission set to make its recommendations for a new NLW rate at the end of October 2024.

Illustrating the NLW Changes

To better understand the potential impact of these changes, below is a comparison of the current wage rates with the proposed NLW for younger workers should the age limit be removed:

Age Group	Current Hourly Rate (April 2024)	Proposed Hourly Rate (April 2025)
Aged 23 and over	£11.44	£11.44
Aged 21-22	£10.18	£11.44
Aged 18-20	£8.60	£11.44
Under 18	£6.40	£11.44

As the table shows, the proposed change would significantly increase wages for younger workers, particularly those aged 18-22, who could see their pay rise by up to 33%. This adjustment aims to create a more equitable wage system where workers are paid fairly for their contributions, regardless of age.

What the NLW Proposal Will Mean for Employers

If the proposal is approved, removing the age limit for the NLW will have considerable implications for employers. While the timeline is still tentative, businesses should start preparing for the possibility of increased wage costs and potential adjustments to their operational models.

Increased Wage Costs

For many employers, the most immediate challenge would be a rise in wage costs. Employers will need to pay workers aged 18-22 at the higher NLW rate, which could significantly increase payroll expenses. This impact will be particularly relevant for hospitality, retail, and care businesses, where younger workers make up a large part of the workforce.

Simplified Payroll and Wage Structures

One potential benefit of removing the NLW age limit is the simplification of wage structures. Employers will no longer need to manage multiple pay rates for different age groups, reducing administrative complexity and ensuring greater consistency in pay across their workforce.

NLW Proposal Implications for Workers

For younger workers, removing the age limit for the NLW could be a game-changer, providing significant pay increases and promoting greater financial security.

Financial Benefits for Younger Workers

A 19-year-old currently earning £8.60 per hour under the NMW could see their wage rise to £11.44 per hour, resulting in an additional £114 per week for full-time workers. This uplift could make a substantial difference in covering living costs, such as rent, bills, and transport.

Improved Job Satisfaction and Retention

The increase in wages is also likely to improve morale among younger workers, who may feel more valued and fairly compensated. Employers who offer competitive pay can expect higher employee retention rates and increased job satisfaction.

Preparing for the Potential NLW Changes

Although the proposal has yet to be confirmed, employers should begin preparing for the possible impact of these wage changes. Here are some key steps to consider:

Employers should review their budgets and financial forecasts to account for the potential increase in payroll costs. This review may involve adjusting pricing models, finding operational efficiencies, or reducing non-essential expenses.

Businesses should prepare to update employment contracts and payroll systems to reflect the new wage rates if the NLW is extended to younger workers. Being proactive will help ensure a smooth transition once the legislation is confirmed.

Clear communication with employees about the potential changes is essential. Informing workers about how the proposed wage increases will affect them will be required, and employers should be ready to address any questions or concerns.

Looking Ahead: All Eyes on 2025

As businesses await confirmation of the proposal to remove the age limit for the NLW, it is essential to remain proactive and prepared. While the change is not yet confirmed, employers must stay informed of developments to ensure compliance and minimise disruption. Regularly reviewing wage structures, updating financial forecasts, and maintaining open lines of communication with employees will position businesses to manage the potential impacts effectively.

By taking these steps, businesses can ensure they are ready to adapt to the evolving wage regulations while supporting their workforce and maintaining productivity.

For expert advice on how to prepare your business for these potential changes, contact our team of employment law specialists.