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National Minimum Wage

Volume 492: debated on Tuesday 12 May 2009

In March 2008 the Government asked the Low Pay Commission to produce their next report on the national minimum wage by the end of February 2009. Due to the exceptional economic circumstances the Low Pay Commission asked the Government for more time to produce their report to allow them to take into account more recent economic data when making their recommendations. The Government granted this request and asked the Low Pay Commission to report by 1 May 2009. I would like to thank the Commissioners for all their hard work.

Low Pay Commissions 2009 report

The main recommendations put forward by the Low Pay Commission concern the rates of the minimum wage. The Commission have recommended that the adult hourly rate of the minimum wage should increase from £5.73 to £5.80. The Commission have recommended increasing the development rate, which covers workers aged 18 to 21-year-olds, from £4.77 to £4.83. They have recommended that the rate for 16 to 17-year-olds moves from £3.53 to £3.57. It is recommended that these changes take place in October 2009.

The Commission has also recommended that the accommodation offset increases from the current £4.46 to £4.51 in October 2009.

In addition, the Government accept the Commission’s recommendations that a policy of “naming and shaming” be implemented for those employers who show wilful disregard for national minimum wage; accept that 21-year-olds should be moved on to the adult rate of the national minimum wage; accepts that commissioning policies of local authorities in respect of social care reflect the true cost of care provision including national minimum wage; and accepts that consideration should be given to tackling non-payment of minimum wage in the informal economy.

The Government note the Commission’s recommendations that they wish to explore a national minimum wage rate for apprentices and that more resource should be dedicated to increase the number of prosecutions.

Government’s response to individual recommendations in the Low Pay Commission’s 2009 report

National Minimum Wage Rates

We recommend that the adult minimum wage rate should increase from £5.73 to £5.80 in October 2009.

We recommend that the youth development rate should increase from £4.77 to £4.83 in October 2009 and that the rate for 16 to17-year-olds should increase from £3.53 to £3.57 in October 2009.

We recommend that the accommodation offset should increase from £4.46 per day to £4.51 per day in October 2009.

Accept

21-year-olds

We recommend again that 21-year-olds should be entitled to the adult rate of the national minimum wage.

Accept

The Government accept that 21-year-old should be entitled to the adult rate of minimum wage. However, as employment for young people is particularly vulnerable in an economic downturn, this change will be implemented from October 2010.

Naming and shaming

We recommend that a “name and shame” policy should be put in place to expose those employers who show wilful disregard for the minimum wage.

Accept

We believe greater transparency in this area is valid, particularly in the light of the fact that the NMW has now been in place for 10 years and is an established part of labour rights.

Apprentices

We recommend that a minimum wage for apprentices should be introduced under the national minimum wage framework.

We recommend that the Government ask the Low Pay Commission, as part of the work for its 2010 report, to consider the detailed arrangements for an apprentice minimum wage under the national minimum wage framework, and to recommend the rate and arrangements that should replace the existing exemptions, together with the timing for its introduction.

Note

We recognise the central role that apprentices play in developing skills in our economy. This is reflected in the Government’s target of 250,000 people a year starting an apprenticeship in England by 2020 and our commitment that one in five young people will be on an apprenticeship by 2013.

Therefore we note this recommendation, and will respond to the recommendation in full at the time of setting the LPC’s remit for 2010, which we plan to do in June.

Social Care

We recommend that the commissioning policies of local authorities and the NHS should reflect the actual costs of care, including the national minimum wage.

Accept

Sufficient resource to increase numbers of prosecutions

We recommend that the Government allocate sufficient resources to HMRC to increase significantly the number of errant employers prosecuted in a criminal court.

Note

We recognise the importance of the role that criminal prosecution plays in enforcing the NMW. Prosecutions are focused on cases that will do most to promote compliance with the law by deterring employers who deliberately disregard NMW requirements, and the Employment Act 2008 strengthened HMRC’s ability to investigate suspected NMW offences. We will keep our approach to NMW enforcement under review to ensure that we have the most effective balance of civil and criminal enforcement activities.

Consideration of measures to tackle the informal economy

We recommend that the Government give urgent consideration to measures that can be taken to effectively tackle employers in the informal economy.

Accept

Tips and the National Minimum Wage

Although this is not part of the LPC’s recommendations, the Government announced last year that we would change the regulations to stop the practice of tips being used to make up the NMW. We intend to proceed with this change in October alongside the LPC recommendations.