Cable defends new minimum wage rates

Employment Law & HR update 20/03/2012

The Government has announced that the national minimum wage for people aged 21 and above will rise by 11p to £6.19 an hour in October – lower than the current rate of inflation.

Changes to the minimum wage followed the recommendations made by the Low Pay Commission in October, and also saw the wage for workers age 18 to 20 remain at £4.98 an hour and for those age 16 to 17 remain at £3.68 an hour.

The cost of living rose by 3.6 per cent in the year to January 2012 according to the latest Consumer Prices Index (CPI). Business Secretary, Vince Cable, said that the minimum wages were set more or less in line with the average increase in earnings – which rose by 1.4 per cent in the same period.

Cable explained that the freezing of the youth rates would help to stimulate the British economy in the long-run by making it more affordable for companies to hire.

“In these tough times freezing the youth rates has been a very hard decision - but raising the youth rates would have been of little value to young people if it meant it was harder for them to get a job in the long run,” he explained.

The decision to peg the rates for younger workers has been criticised by union leaders, who have said that when compared to the rate of inflation, it essentially means that they are taking a pay cut.

TUC chairman, Brendan Barber, said, “It is wrong to deny young people an increase this year, as there is no evidence that the minimum wage has had an adverse impact on jobs. […] There is now a real danger that young people will view minimum wage work as exploitative.”

Business groups have, however, criticised the rise in the adult rate, stating that it would feed the inflation of wages at higher levels.

Commenting on the announcement, Nick Soret, of RBS Mentor Employment Law & HR said:

"Business owners will be relieved that the increase in the minimum wage is being pegged at less than 2% this year, with increases for most of those aged under 21 frozen”.

“This is in line with government policy to "improve the labour market position of young people" and to reduce the burdens on employers to encourage growth”.

“In the longer term, it seems businesses can look forward to further simplification of the national mimimum wage structure, while retaining the principle of a minimum wage as a basic level of protection for workers".

For details on how RBS Mentor could help your business in situations like this and many others, contact us today. If you already subscribe to Mentor, please call the Advice Service.

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