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Employment Law - National Minimum Wage

Author: Joan Finch, J Finch & Associates

Published: 13th October 2014 14:09

Pile of English pound coins

Following on from our article "Employment Law - What's Around the Corner?" in March 2014, you will be well prepared for the National Minimum Wage (NMW) increase which came in to force as of 1st October 2014, but have you considered the impact the NMW has on the remainder of the workforce's pay and company pay structure. In this article we are visiting NMW and the potential impacts this has on the company pay structure.

What are the NMW increases for this year?

The hourly rate for all of the age groups is increasing, which due to difficult economical times over recent years has not always been the case. The increases are as follows:

21 and overs - from £6.31 to £6.50ph
18 - 20 years old - from £5.03 to £5.13ph
16 - 17 years old - from £3.72 to £3.79ph
Apprentices - from £2.68 to £2.73ph

Some employers may consider this as something they have to do, as it is a legal requirement, or they might say it is just paying more because they have too. If an employer is found to be in breach of NMW, there is the increased penalty fine of £20,000. The penalty is in addition to having to pay the back dated owed wages. Finally, if an employer fails in it's duty to pay what it owes, the company could be named publicly.

What happens to the other employees who are paid above the NMW, do they lose out because the pay increase goes to the lower earners? Some may feel they are entitled to a pay increase too. Or others my think this is unfair.

There are probably a number of views on this, and speaking to a colleague who works in the hospitality sector and who has not received a pay increase for a significant number of years, the increases on the NMW, has eroded what was a good salary for the position which she started a number of years ago.

What are the potential impacts on the workforce?

Firstly you have the age bracket and level of staff that receives the NMW increase, which ideally are engaged and looking forward to the pay increase.

Then you may have the next levels of the structure, or more skilled workers on a higher rate of pay; what steps can an employer taken to keep them engaged? You could consider the following:

Increase by the equivalent amount, which would be ideal but is not always an option.
Cost of Living increase, maybe in line with the rate of inflation.
Leave higher salaries as is, unfortunately this could be dis-engaging and result in a lesser differential in salaries within the company's organisation structure.

When you are planning how to approach NMW and any other increases, remember to consider Employer Tax and NI contribution and pension contributions.

As a company you will want to ensure that you have all the correct documentation in place to support your business at present and in the future. Therefore, if you have concerns or want to discuss your current and future contract of employment, employee handbook, HR policies and procedures, here at J Finch & Associates Ltd we can provide you with friendly practical advice and the tools to support your business.

Article by Joan Finch of J Finch & Associates Ltd

Thanks to Joan our AboutMyArea/EN9 editorial contributor for this informative article. Check out Employment Law section in the Business Zone to read more of her articles.

Joan is an award winning, highly experienced, commercial, self-motivated HR professional who has operated within the sectors of Retail, Hospitality and Catering, specialising in Employees Relations. Joan is now the proud owner and creator of J Finch & Associates Ltd. Joan's career spans over 10 years, and has broad experience within Human Resources, with initially being a HR generalist covering all aspect of HR from Recruitment, learning and development, training, Employee Relations, redundancy, restructures and TUPE. Since 2008 she has specialised in Employee Relations applying a commercial and practical approach to all ER related issues.

For more information on Human Resources, Employee Relationship and Employment Law issues you may like to take a look at J Finch & Associates website: http://www.jfinch.co.uk/ or call 0330 2230158.

When contacting J Finch & Associates please let them know you found their details on AboutMyArea website!