NATIONAL MINIMUM WAGE
Government approves new £5.80 minimum wage rate
The government has announced new national minimum wage rates to take effect in October 2009.
Low paid workers aged 22 and over can look forward to an increase from £5.73 to £5.80 an hour.
The rate for 18- to 21-year-olds will also rise from £4.77 to £4.83.
For 16- and 17-year-olds, the rate will go up to £3.57 an hour from £3.53.
Nearly one million people will benefit from October's increase after the government approved recommendations from the independent Low Pay Commission.
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Business Secretary Lord Mandelson said: "The Low Pay Commission has carefully examined the latest economic data before making their recommendations on the minimum wage rate, balancing the needs of workers and businesses in the current economic climate. The government agrees with this assessment and has accepted the recommendations for these new rates to take effect in October."
The deadline for submission of the Low Pay Commission's (LPC) recommendations to government was extended from February to Friday 1 May to allow Commissioners to take into account the latest possible economic evidence.
Chairman of the LPC George Bain said: "These are very challenging times for the UK and unprecedented economic circumstances for the minimum wage. We believe that the Low Pay Commission's recommendations are appropriate for this economic climate. They reflect the need to protect low-paid workers' jobs as well as their earnings. This was a difficult year for the Commission but our evidence-based approach led to another unanimous report. I am delighted that the government has again accepted our recommendations on the rates this year."
Other LPC recommendations
As well as the rate changes to take effect this year, the government has accepted an LPC recommendation that the adult rate of the minimum wage should be extended to 21-year-olds. This will be implemented from October 2010.
The LPC also recommended that information should be available on employers who have shown wilful disregard for minimum wage laws. The government has today committed to develop proposals and consider the practical issues involved.
--> The government also announced that minimum wage regulations should be changed so that tips and service charges could no longer be used to make up staff salaries to the minimum legal level. This change will take effect in October 2009.
Some reactions
Chartered Institute of Personnel and Development
www.cipd.co.uk
The announcement on the small increase in the minimum wage shouldn’t burden employers unnecessarily, but Charles Cotton, The CIPD’s reward adviser, argued that it could have an impact on younger workers:
“We have advised a freeze on the minimum wage in light of the recession, particularly following the 21p increase in 2008, on the grounds that keeping people in work and maximising job opportunities must be a priority. While we support the Low Pay Commission, we are concerned that this decision will increase the risk of job losses in low-paid sectors. This should have been avoided at a time when deflation on the RPI measure of inflation will limit the impact of a national minimum wage freeze on people’s real living standards.
“Our greatest concern at the moment is for younger workers and job seekers. The Office of National Statistics has shown that the recession is having a far bigger impact on employment for young people. In this context, we are pleased that the LPC has not given a disproportionate increase to younger workers.”
Confederation of British Industry
www.cbi.org.uk
The announcement of an increase in the national minimum wage was welcomed by the CBI, the only business representative organisation on the Low Pay Commission.
John Cridland, CBI deputy director-general, said: “This moderate increase recognises that many businesses are struggling, and helps protect jobs at a time of rising unemployment. The inflation-busting rise some unions had called for would have hit firms hard and put many lower paid workers on the dole. Over the past decade, the minimum wage has risen faster than average earnings and inflation, and a sensible, cautious approach now will help ensure this landmark piece of legislation continues to improve the lives of low paid workers for many years to come.”
The TUC welcomed the “modest minimum wage boost”, but warned that low-paid workers must have more next year. TUC General Secretary Brendan Barber said: “Low-paid workers will be relieved to see a further increase in the minimum wage this year. The Low Pay Commission was right to withstand pressure from business to freeze the minimum wage. The recession was caused by very highly paid people damaging the nation's financial system. It would not have been fair to force the low paid to suffer a freeze in wages, while the city bankers still get their bonuses. But this increase is a very slender one. The LPC must be much more generous when the economy recovers next year.”
The TUC also welcomed the commitment to reduce the age at which the adult rate is paid to 21 next year. Brendan Barber said: “There is no doubt at all that 21 year olds should be treated as adults at work. In order to reflect the real worth of young workers the LPC will need to reduce the threshold further in future years.”
But the TUC was disappointed by the government's delay in considering the introduction of a national minimum wage special rate for apprentices. Brendan Barber said: “The LPC was right to recommend that apprentices should be protected by the minimum wage from next year. The government should reconsider delaying this and ask the LPC to start examining a new minimum wage special rate for apprentices as soon as possible.”
Want to know more?
Department for Business Enterprise and Regulatory Reform: You can download details of the announcement of the latest hike in the minimum wage by accessing the BERR web site. Web: www.berr.gov.uk/whatwedo/employment/pay/index.html.
Directgov: The government site provides an easy-to-use guide to UK employment law, including minimum wage regulations. Web: www.directgov.gov.uk.
Low Pay Commission: The LPC was established as a result of the National Minimum Wage Act 1998 to advise the Government about the national minimum wage. Web: www.lowpay.gov.uk.