FCSA support the concept of the National Minimum Wage (NMW) as we feel it is helpful to have a clear minimum standard that Government expect all employers to adhere to. That said, it is of critical importance to the functioning of our economy – and wider society – that these rates are set at a sustainable level, and that the impacts of rate rises are properly understood. It is from this perspective that FCSA are able to provide insights and inform policy development.
Employers are currently facing cost pressures from multiple fronts. Including; the recent increase in Employer’s National Insurance Contributions, inflationary pressures and the added costs and obligations that the Employment Rights Bill will bring. The Office for National Statistics (ONS) have estimated that the number of available jobs fell by 63,000 between March and May 2025, to 736,000. Unemployment is estimated to have risen from 4.5% to 4.6%, the highest level in almost four years.
The trend the ONS have identified highlights how vulnerable employers are to further costs pressures and this demonstrates the importance of taking a proportionate approach to increasing NMW and the National Living Wage (NLW). Afterall, the benefit to employees of increasing NMW and NLW rates is only felt if employment can be maintained. It is also important to note that the rise in the average wage was 5.2% between February and April 2025, this is down from 5.6%.
FCSA also raise concerns around policies that relate to young people entering the work force. Sadly, the proportion of young people that are economically inactive has never been higher. It is important that these trends are properly understood, and that NMW and NLW rates are adjusted to reflect the aim of increasing youth employment. We all want to see young people realise their potential and build their stake in society.
We believe it is important to maintain the difference between NMW/NLW rates across the age ranges. The main effect of setting the wage of someone who has newly entered the workforce at the same rate as someone who has been in the workforce for 3 years or more is that they will be less likely to secure employment. Employers value experience, and without a difference in price, someone looking to secure their first job is unable to compete, which must be very disheartening for them.
As a general principle, we recommend that any increases in the NMW and NLW are linked to inflation and that attention is paid to adjustments to state benefits – it is important that being in work is incentivised, when compared to being on benefits.
FCSA realise that setting these rates is never easy, and we welcome the Low Pay Commission’s evidence-based approach to making recommendations to Government.
