The National Minimum Wage: stamping out low pay?

UK employers have given overwhelming support for the latest increases to the National Minimum Wage. Nine in 10 (94%) agree with the most recent increase in the adult hourly rate, to 4.85 from 1 October 2004, according to the latest research from IRS Employment Review, published today (Tuesday 25 January) by LexisNexis Butterworths.

However, when asked at what level the minimum rate should be set, almost half of the surveyís respondents (44.3%) said 5.00 an hour. Almost a quarter (23.8%) stated that 4.85 an hour is the appropriate rate, while another quarter (25.4%) assert that the minimum hourly rate should be above 5.00. Only a very small minority (1.6%) of respondents favour an NMW of below 4.85, while less than one in 10 (4.9%) believe that there should be no set minimum rate.

The survey, conducted in November 2004, examines employersí responses to the impact of the current statutory pay floor and its future. The research is based on responses from the views of 129 private and public sector senior remuneration and HR managers in UK organisations. It is in the new edition (816) of IRS Employment Review (www.irsemploymentreview.com).

Key points:
Uprating the minimum wage

Almost half (44%) the survey respondents favour an inflation-linked increase in the NMW.

One-third (34 %) prefer increases in line with average earnings.

Just over a quarter (27%) support increases that reflect the Low Pay Commissionís recommendations.

Impact of the minimum wage
Less than a third (30.4%) of respondents reported their organisation had to increase adult minimum rates to comply with the national minimum wage. This figure rises to eight in 10 (83.9%) among respondents whose organisations currently pay a minimum rate of 4.85.

More than three-quarters of participants voiced some agreement that enforced increases through the national minimum wage had to be directly funded by company profits.

More than one-third of participants (38%) felt that their staff saw the NMW as a benchmark to facilitate increases to a higher rate, bearing further weight on the claim that being seen as a ìminimum wage employerî is undesirable.

Current minimum rates
More than two-fifths (44.3%) of the sample pay a minimum rate of 5.21 an hour or more, with just over a quarter (26.6%) paying their lowest paid employees more than 6.00.

A quarter (24.8%) of survey respondents pay the statutory pay floor of 4.85 an hour to their lowest paid members of staff.

IRS Employment Review pay and benefits editor, Sheila Attwood said:
ìThe National Minimum Wage continues to be subject of debate. While our survey shows overwhelming support for the latest increases, trade unions and employersí federations are divided over the scale of future increases to the NMW.

Just how high those future increases should be is hotly contested. While a quarter of the respondents who stated that the adult minimum wage should be above 5.00 an hour are from organisations whose minimum rate is currently at 4.85, many organisations told us that pay increases to accommodate the NMW were funded out of company profits or through increasing prices. This suggests that while there is support for more uplifts, many organisations have few surplus funds available to absorb the cost of rises above the rate of inflation.