Millions of workers are to get a pay rise in April that will bump their hourly rate to almost £12 an hour.

Among those getting more money in their pay packet will be hundreds of thousands of younger workers, who for the very first time will find themselves entitled to extra cash, and here’s how the new pay scheme will work.

What is the National Living Wage?

The National Living Wage is not to be confused with the National Minimum Wage.

The National Minimum Wage is the minimum amount of money, per hour, almost all workers are legally entitled to if they are of school leaving age. The National Living Wage, however, is higher than the minimum wage, but is given to older workers only.

It was initially introduced in 2016 for those over the age of 25 because the government said it wanted to ensure that ‘work pays’ while cutting the amount of low-paid workers that needed to top up their wages with additional state benefits. At the time the living wage hourly rate was set at £7.20 – and 50p higher than the minimum wage.

In 2021 the National Living Wage was adjusted further to include people aged 23 and over.

What is it worth today?

Today, the National Living Wage is currently worth £10.42 an hour for those aged 23 and over.

But last November the government announced it planned to make more changes to the National Living Wage. This included a rise in the hourly rate, together with a proposal to include more – and younger – employees.

A new hourly rate of £11.44 is shortly to be introduced – and will apply to 21 and 22-year-olds for the very first time.

When are the rules changing?

The new hourly rate, and age brackets, will come into force on April 1.

Do companies have to pay it?

In short yes. All firms, regardless of their size, will be bound by the new rules.

It will be illegal to pay entitled staff less than the amounts set out and can be punishable either with a fine or penalty. Company bosses not following the rules also risk being taken to court, that could lead to more serious punishment from HMRC.

Some big-name firms have already announced new 2024 hourly rates ahead of the change. Waitrose and John Lewis – part of the same group will pay staff £11.55 an hour from April or £12.89 if they work in London.

The Co-op has announced plans to increase pay for its thousands of workers by 10.1% to £12 an hour. This will rise to £13.15 for workers in the capital.

While Asda, after the rise to £11.44 in April, plans to raise pay again from July to £12.04 or £13.21 for stores within the M25.

However concerns about the impact on smaller businesses have been raised – with Chambers of Commerce branches offering support and advice to small and medium-sized firms ahead of the change, to support those facing increased costs in already difficult economic times.