The Department for Business and Trade have published an updated remit for the Low Pay Commission (LPC), following the change in Government. The updates involve a directive for setting the National Living Wage, adjustments to age bands, broader considerations for wage recommendations, and an acceleration in the implementation of these changes. These changes, particularly the timing, could significantly impact hospitality businesses, according industry trade bodies, requiring them to adjust their financial and operational planning from next year.
Business Secretary Jonathan Reynolds and Deputy Prime Minister Angela Rayner written to the LPC and tasked them to narrow the gap between the National Minimum Wage rate paid to 18- to 20-year-olds (£8.60) and the National Living Wage paid to those over 21 (£11.44) with the aim of moving towards one standard adult rate for everyone over 18. For workers over the age of 21, the LPC has been asked to recommend a new National Living Wage , which should be at least two-thirds of the UK median earnings for workers in this age group. The LPC has also been instructed to factor in the cost of living when deciding the rate of the National Minimum Wage and the Living Wage with all the changes effective from April 2025.
The revised remit also asks that the recommendations should consider the business impact, the labour market, competitiveness, the wider economy, the cost of living, and inflation trends.
Hospitality industry leaders, such as Stephen Montgomery and Kate Nicholls, have raised concerns about the timing of these changes. They argue that immediate changes to the LPC’s remit ahead of the October statement are inappropriate and disruptive, as the sector has been planning based on the previous remit. They suggest these changes should have been postponed to 2026 to provide businesses with more stability and predictability.
Stephen Montgomery, Spokesperson and Director of the Scottish Hospitality Group said, “Any changes now to the LPC ahead of the October statement, would quite frankly be inappropriate, and ill-judged, and in many cases would have a negative effect across the hospitality sector. The only measurable way which businesses could mitigate any increased cost pressures would be via the immediate reduction in the VAT rate for the hospitality sector.”
Kate Nicholls, Chief Executive of UKHospitality, said, “Our staff are the lifeblood of hospitality and businesses are passionate about properly rewarding them for their crucial role.
“That’s why we agreed with the current remit of the Low Pay Commission to maintain wage rates at 66% of median earnings, which will see the Living Wage increase at twice the rate of inflation. After all, this is the basis upon which hospitality businesses have been planning and budgeting.
“However, making significant changes to the remit for 2025 now is disruptive and unhelpful. Evidence has been submitted to the LPC on a basis that is now out-of-date. It would have been far more pragmatic to wait and make these changes in 2026.
“With a new remit now in place, the LPC must recognise that the 20% increase to wage rates over the past two years clearly accounted for the cost of living. I would urge them not to recommend yet another significant increase, which would raise serious questions over affordability.
“As the Government recognises in its letter to the LPC, wage rates should be consistent with delivering growth for both staff and businesses. There now must be a fresh round of consultation with business groups before recommendations are made to ensure that balance is struck in an affordable manner, particularly in how it addresses changes to youth rates.
“It’s also the case that business costs need to come down to offset rising wage costs, and that should start with the Government fulfilling its manifesto commitment to reduce the burden of business rates on hospitality businesses, as well as reducing employer National Insurance Contributions.”
The 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.