Meanwhile, the national minimum wage for 18 to 20-year-olds is also expected to increase by 3.9%, from £10.85 to around £11.27.
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The changes are expected to be confirmed by Chancellor John Healey alongside the Budget tomorrow (28 October).
Youth wage rise slows
The increase for younger workers would mark a slowdown from the larger rises introduced in recent years.
According to reports, the move would effectively end Labour’s manifesto pledge to bring the minimum wage for younger workers into line with the national living wage during this Parliament.
Healey has previously acknowledged the potential trade-off between higher wage rates and employment levels, particularly among younger workers.
The change comes after pub operators warned rising employment costs risk making it harder for hospitality businesses to offer young people their first jobs.
In August, The Morning Advertiser (MA) reported there were 981,000 young people aged 16 to 24 not in education, employment or training, equivalent to 13% of the age group.
Operators told The MA increasing employment costs could make businesses more cautious about recruiting inexperienced younger workers, despite hospitality traditionally providing many people with their first step into work.
Hospitality impact
Hospitality businesses have repeatedly warned rising employment costs are limiting recruitment and investment, particularly for entry-level roles.
UKHospitality (UKH) chief executive Allen Simpson told The MA: “There were well placed rumours that the rate could be as high as 5.5%. The fact the government have listened to concerns about the impact on jobs is good news.
But the fact remains employment costs are too high and the NICs jobs tax is a killer. To get unemployment down the sector needs real change to the tax system.
Allen Simpson
The British Institute of Innkeeping (BII) said its members had long supported paying staff fairly but warned employers could no longer absorb continued increases in wage and national insurance costs.
It told the MA: “The policy intent of putting more money in working people’s pockets will instead have the opposite effect, forcing employers to reduce hours, shifts and inevitably, jobs.”
The BII added operators were already taking on additional work themselves because they could not afford to recruit, with some licensees working more than 80 hours a week.
If Government continues to push wages towards the £15 level and doesn’t support pubs with a significant reduction in the tax burden they face, we will see thousands of job losses, a lack of opportunities, particularly for young people, and ultimately, the loss of essential safe spaces at the heart of every community.
British Institute of Innkeeping (BII)
UKHospitality chair Kate Nicholls told The Times that “stepping off the accelerator” on the minimum wage for young people was welcome but warned the sector still faced a “double whammy” from wage increases and employer national insurance contributions.
She added: “This is going to have an impact on the sector, which is already struggling to absorb two years of double digit pay increases and the national insurance hit.
It is going to hurt the hospitality sector and its ability to create jobs and tackle the Neets crisis.
Kate Nicholls
British Beer and Pub Association (BBPA) chief executive Emma McClarkin said it would be a “grave mistake” to take the sector’s role in employment for granted.
She said: “At a time when young people are finding it really tough to find work, it’s key Government continues to back us so we can continue to invest in our younger employees.
“This Budget we want to see Government build on their support for the sector by reviewing employment costs, particularly for under 25s, so we can continue to keep people in work, boost the economy, and remain as the heart and soul of communities.”
