Changes to minimum wage and annual leave
Important changes to the amount workers must be paid and the amount of holiday they can take have come into force.
As from 1 October both the minimum wage and annual leave entitlements have increased.
Minimum wage rates rise from £5.35 to £5.52 an hour for adult workers aged 22 and above; from £4.45 to £4.60 an hour for workers aged between 18 and 21; and from £3.30 to £3.40 an hour for workers aged between 16 and 17.
The minimum annual holiday entitlement increases from 4 weeks (20 days for those working a 5 day week) to 4.8 weeks (24 days). On 1 April 2009 there will be a further increase to 28 days.
Pat McFadden, the minister for Employment Relations, said: “Up to six million workers, including 3.5 million women and 2.5 million men, will benefit from the extra annual leave. Businesses will also benefit from a more motivated and productive workforce.”
Mr McFadden continued: “In addition, more than a million workers will be better off as a result of the minimum wage increases.”
The minister also highlighted the strict new stance the government is taking on ensuring that all employers comply with the law on the national minimum wage.
He said: “[The increase] will be backed up by a tough new minimum wage enforcement regime announced by the government earlier this month, including increased maximum fines for employers who flout the laws. Employers who do not pay the correct wages will have to repay arrears to their workers at a higher rate.”
In the light of the latest rise, the British Retail Consortium (BRC) has reiterated its call for greater clarity when it comes to setting increases in the minimum wage.
A BRC survey found that the six per cent increase in the hourly rate that came into effect in 2006 actually cost retailers 13 per cent in extra costs.
As well as pushing up pay for those workers on the minimum wage, the increase placed additional pressures on maintaining differentials for those employees further up the wage ladder.
As a consequence, the BRC said, the total wage bill for shop floor staff rose by 12 per cent between 2006 and 2007, three times more than inflation, to £25.8 billion. More than half that increase was a result of the £1.7 billion that the minimum wage added to costs.
The BRC argued that the minimum wage has risen so quickly since its introduction that it is distorting pay structures, eroding differentials and weakening rewards and incentives for improving skills.
Kevin Hawkins, the BRC’s director general, said: “After four previous inflation-busting rises, we recognise the Low Pay Commission gave businesses some respite by recommending this year’s three per cent increase but last year it was six per cent, and four per cent and eight per cent the years before that.”
Mr Hawkins added: “The LPC must use its current review to spell out whether the minimum wage is meant as a basic floor for pay or a method of redistributing income from higher to lower wage earners in sectors such as retail. If the LPC has no clear vision of what success looks like, how does it know whether it’s succeeding or not?
“Future increases should be guided much more closely by increases in median earnings in sectors, including retail, which are most affected by the minimum wage.”
Date:1 October 2007
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