Apprentices set for 7p rise in minimum wage as Low Pay Commission says rise in line with 16 and 17-year-old ‘normal’ workers is ‘too expensive’ for businesses

Apprentices set for 7p rise in minimum wage as Low Pay Commission says rise in line with 16 and 17-year-old ‘normal’ workers is ‘too expensive’ for businesses

Apprentices look set for a 7p rise in their national minimum wage of £2.73 an-hour while proposals to shift them up onto a par with 16 and 17-year-olds have been rejected as too expensive for businesses by the Low Pay Commission (LPC).

The call to increase the minimum wage by 2.6 per cent to £2.80 came with an LPC rejection of Business Secretary Vince Cable’s proposal to give apprentices a pay rise of more than £1.

He suggested the apprentice minimum wage be brought into line with the non-apprenticeship minimum for 16 and 17-year-olds, currently at £3.79 per hour.

The LPC said such a move could affect 200,000 apprentices with the cost to employers hitting at least £160m each year, possibly “much more”.

But the LPC agreed with Mr Cable that higher-level apprentices should earn the ‘normal’ worker national minimum wage, which is set to rise from £6.50 to £6.70, from October.

In its report to Dr Cable (pictured), the LPC said: “You asked us to consider this option as part of a broader review to see whether the structure of the apprentice rate could be simplified in order to improve compliance, and also to consider whether the apprentice rate should continue to be applied to higher levels of apprenticeship.

“We recommend that the apprentice rate should not apply to higher apprenticeships. But in terms of other possible structural changes, we believe there would be significant risks in a merger with the 16 to 17-year-old rate.

“It would mean an unprecedentedly large increase in the value of the rate, of between 39 and 88 per cent.

“It would affect over 90,000 and possibly as many as 200,000 apprentices — up to a quarter of all apprentices — with significant impact in low-paying sectors that provide many apprenticeships and are of particular value to low-skilled 16 to 17-year-olds.

“The cost to employers would be at least £160m each year and could be much more. That would be around half the total cost of the recommended increase in the adult rate, and at a time when there are other funding pressures on employers in England from possible mandatory cash contributions to training. We discuss these and other concerns in our main report.

“As you requested, we have considered phased introduction, but it would not remedy these issues.”

A BIS spokesperson said: “The government will now consider the LPC’s recommendations and respond next month. Once the government has responded, the regulations to change the rates will be debated in Parliament before the new rates are introduced on October 1.”