Manufacturers ‘will live’ with minimum wage hike

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Manufacturing News, Source : TheManufacturer.com
Published : 25 Feb 2005 11:32
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The national minimum wage will rise above £5 for the first time from October 2005, Trade and Industry Secretary Patricia Hewitt announced today.

The adult rate of the minimum wage will increase from £4.85 to £5.05 in October 2005 - in line with average earnings - with a further six per cent increase to £5.35 in October 2006.

The rise takes the minimum wage, in 2006, to almost 50 per cent above its 1999 introduction rate.

The latest increases will extend coverage of the minimum wage to 1.3 million workers in October 2005 and 1.4 million workers in October 2006. Announcing these increases Mrs Hewitt said: "The great news is that well over a million workers will receive a guaranteed pay rise by this October, rising to almost a million and a half people by October 2006. The minimum wage has made a real difference to the lives of thousands of low paid workers - particularly women, who make up some 70 per cent of those benefiting. Year on year increases protect some of society's most vulnerable people from exploitative rates of pay. Despite predictions to the contrary, the national minimum wage has not affected the job prospects of low-paid workers in the UK. Unemployment is at record low and a record 28 million people are now in work."

The Government has also:

* agreed that the Low Pay Commission should review the 2006 rates, taking into account the latest economic conditions;

* agreed that the youth rate, which applies to 18-21 year olds, should rise to £4.25 in October 2005 and £4.45 in October 2006;

* agreed that the Commission should review the operation of the 16-17 year old rate and report in 2006;

* announced that it will keep the issue of whether to put 21 year old workers onto the adult rate under review; and

* agreed that the Commission should review the minimum wage treatment of benefits in kind including where those benefits are offered as part of a salary sacrifice arrangement.

Ms Hewitt also announced more than £3 million has been recovered from bosses who have not been paying the national minimum wage since April 2004. The total amount recovered from employers since the introduction of the national minimum wage in April 1999 is now nearly £20 million. The Government will shortly be announcing further measures to tackle serious non-compliant employers.

According to EEF, the manufacturers organisation, the Government has missed an opportunity to provide British manufacturers with greater certainty about the impact of the National Minimum Wage on their businesses by failing to introduce a pre-determined formula for calculating future increases,.

EEF has consistently argued in its evidence to the Low Pay Commission that future increases in the NMW should be determined by a formula, based on retrospective movements in basic rates of pay across the economy. This would enable manufacturers to plan for the resultant impact that these increases will inevitably have on their costs and remuneration structures through the need to maintain pay differentials.

Commenting on today's announcement, David Yeandle, EEF deputy director of employment policy, said: "Whilst most manufacturers will be able to live with this increase, they continue to believe that a pre-determined formula should be used to set further increases. The Government has missed an opportunity to provide them with greater certainty about the future impact on their businesses which would enable them to plan accordingly."