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National Minimum Wage

From 1st October 2007 the National Minimum Wage changes:

  • Adult rate (workers aged 22 and over) will increase to £5.52.
  • Development rate for 18-21 year olds will increase to £4.60.
  • Development rate for 16-17 year olds will increase to £3.40

The rate allowable for the accommodation offset will increase to £30.10 per week (£4.30 per day). These new rates only apply to pay reference periods beginning on or after the 1st October 2007 and mean that around a million low paid workers will be due a pay rise.

This also follows Prime Minister Brown’s recent pledge to the Trades Union Congress (TUC) annual conference. Traditionally more popular with trade unions than Tony Blair, Mr Brown attempted to gain the good side of the TUC by ensuring a tougher enforcement of the National Minimum Wage as well as creating an extra ½ million jobs and doubling the number of apprenticeships.

This pledge closely follows the first prosecution of an employer for breaching National Minimum Wage rules. Owner, Teresa Aguda, of Rascals Day Nursery in North East London, was fined £2,500 plus £500 costs after she admitted obstructing HM Revenue & Customs inspectors who were attempting to investigate payments to nursery workers.

The full force of the law should be used against employers who deprive their staff of their legal right to the minimum wage. It is good to see Revenue & Customs take this tough line. It is simply not good enough merely to make employers pay employees what they should have been paid. They should be punished as well. TUC general secretary, Brendan Barber

Following a series of investigations into the hospitality, catering, cleaning, security and caretaking workforces, the government has doubled the budget for investigations and is now pursuing fines of £220 for each worker found to not be being paid the minimum wage. Persistent breaches can lead to fines of up to £5,000.

Efforts are made particularly in identifying areas where vulnerable employees may be prevalent, whether migrant, unskilled and those with poor qualifications, especially where they are employed in part time or temporary job roles.

What's happened until now?

National Minimum Wage law originally came into force on the 1st of April 1999. The number of hours for which employers have to pay their workers is calculated differently according to the type of work they do based on time, salaried-hours, output and unmeasured work.

September saw additional pressures for change to national minimum wage being pursued by the Institute for Public Policy Research (IPPR) who have put proposals forward for a new London minimum to be set at £6.50. Research shows that a minimum wage worker minimum wage now increased in London earns just one-third of the average wage in the city, while the average minimum worker in the UK earns more than half the national average wage. “London’s strong economy means the minimum wage can be increased without hurting the economy or job creation”. Kate Stanley of IPPR social policy also stated that “If the government wants to tackle the gap between rich and poor without increasing taxes, a higher wage in London must be part of the solution”.

With over £22million recovered from employers in underpayment so far, the Government crackdown has commenced with direct mail being distributed to hotel employers pointing out responsibilities and also addressing issues in relation to charging workers for accommodation. The intention is for employers to self-comply and get their act in order, but failing this, HMRC enforcements officers are visiting target employers to check that they are taking note and complying with the law. Those found failing risk criminal prosecution.

However, at a very recent hearing of the Central London Employment Tribunal, HMRC lost a case against a restaurateur who was only paying £3-£4 per hour to their workers. HMRC officials had ignored significant monies paid through a separate tronc, which when added to the hourly rate, meant some of the waiting staff were earning enough to end up paying 40% tax. This tribunal ruling removes the ambiguity in HMRC E24 tronc guidance which did not make it clear whether discretionary service charges and credit card tips counted towards minimum wage.

Further calls for change have been made by the Employers Forum on Age (EFA) who considers that the national minimum wage for younger workers constitutes age discrimination and must be brought into line with the adult rate.

We are frustrated by the refusal to address the fact that under the current bands, 18 to 21 year olds are paid less, simply because of their age and irrespective of their capabilities or responsibilities. Sam Mercer, Director at the EFA

Age discrimination became illegal on the 1st of October 2006 and the EFA call follows warning from lawyers that the national minimum wage flouts these age laws and those apprenticeships specifically targeted at younger people would eventually be proved illegal.

Some use of the accommodation offset is also under consideration for revision by the Government in relation to Councils with a view to it not being allowed to be applied where councils provide social housing to their workers.

Note

Employers who are paying close or under the minimum wage urgently need to review their payments to employees and ensure that they comply with the new minimum wage requirements which came into force on 1st October 2007.

Please contact us if you need further advice around this issue.

  • 1st October 2007
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