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New minimum wage from 1st October 2014 – how is it calculated??

The National Minimum Wage from 1st October 2014 is as follows;

  • Adult rate £6.50 an hour – up by 19p an hour
  • rate for 18-20 year olds £5.13 an hour – up by 10p an hour
  • rate for 16-17 year olds £3.79 an hour – up by 7p an hour
  • apprentice rate £2.73 an hour – up by 5p an hour

The hourly minimum wage is the minimum amount that an employer is allowed to pay their workers. The minimum wage first came in to force on 1st April 1999 when it was set at £3.60 an hour for adults. At this time it was estimated that 1.9 million people were being paid below this.

The rate is set by an independent body called the Low Pay Commission. Every year they consider a number of factors before setting the new annual minimum wage rate which is set at a figure which is supposed to be fair to both the employer and the worker. They have to consider carefully the balance between the rise in the overall cost of living and the cost to the employer. If the National minimum Wage is set too high it will effect the number of people being employed because employers will not be able to afford to keep their workers.

The estimated cost of living in the UK – The Living Wage, is currently calculated at £7.65 an hour for the UK with the exception of London where it is calculated at £8.80 an hour. This is a figure that takes in to account all costs of living and has historically always been higher than the National Minimum Wage. Campaigners argue that the minimum wage should at least equal the living wage to be fair to the worker. Currently The National Minimum Wage is £1.15 an hour less than The Living Wage.

Across the world there is a large variance in the minimum wage being paid, mainly because of the different costs of living in each country. In a recent survey of 13 countries the UK’s £6.50 an hour was the 8th lowest hourly amount out of the 13. Australia pay the most, a massive £10.29 an hour whilst the lowest is Portugal at £2.24 an hour.