Councils are expecting to fork out an extra £337m a year after the minimum wage was increased to £7.50 an hour in today’s Autumn Statement.
Chancellor Philip Hammond confirmed the National Living Wage (NLW) for all those aged over 25 would be increased by 4% in April 2017.
The move is expected to mean a pay rise for over one million workers, with the chancellor stating it would deliver a yearly pay rise worth over £500 to a person in full time employment.
The Government is aiming for the NLW to reach 60% of median earnings by 2020.
Mr Hammond said: ‘We recognise that more needs to be done to help families make ends meet and to ensure every household has opportunities to prosper,’ the chancellor added.
However, figures from the Local Government Association show that the NLW will cost councils at least £337m in 2016/17. The analysis by the LGA also shows that by 2020 - when wages are set to be £9 an hour - this could cost councils £111m.
There have also been warnings that the NLW will create a ‘pay crunch’ in the social care sector, with one million care workers likely to see increases in their salary. The Resolution Foundation has calculated the new wage would leave a funding gap of around £1.4bn in the sector.