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National Minimum Wage Regulations 1999 (Amendment) Regulations 2009

Volume 712: debated on Monday 6 July 2009

Considered in Grand Committee

Moved By

That the Grand Committee do report to the House that it has considered the National Minimum Wage Regulations 1999 (Amendment) Regulations 2009.

Relevant document: 17th Report from the Joint Committee on Statutory Instruments.

The 2009 national minimum wage regulations make three changes. First, they increase the hourly rates of the national minimum wage and the maximum amount for accommodation that is allowed to count towards pay for national minimum wage purposes. Secondly, they stop tips, service charges, gratuities and cover services paid to a worker through the employer’s payroll from being used to make up pay for national minimum wage purposes. Thirdly, they rectify an anomaly by ensuring that the Erasmus and Comenius programmes under the European Union’s lifelong learning umbrella are exempted from the national minimum wage.

First, I shall deal with the increases in the national minimum wage rates and the accommodation offset that are contained in Regulations 2, 4 and 6. As noble Lords will be aware, we are currently celebrating the 10-year anniversary of the national minimum wage. Despite the controversy when it was introduced, and a few dire predictions, it has become an accepted and vital feature of the British employment landscape. It continues to provide a floor below which wages cannot fall and therefore gives a certain level of protection for all vulnerable individuals.

To ensure that national minimum wage rates properly take account of economic circumstances, they are reviewed annually by the Low Pay Commission, an independent body made up of employers, trade unions and academics. The aim of the commission is to have a minimum wage that helps as many low-paid workers as possible without any significant adverse impact on inflation or employment.

This year, in the wake of the worst financial crisis since the 1930s, the commission has been doubly concerned to make sure that it gets its recommendations right. The Government therefore considered it right that the commission should be allowed to delay its report for several months. The delay gave the commission time to access additional data, including a further inflation report from the Bank of England, jobs figures for December 2008, gross domestic product data for the fourth quarter of 2008 and average earnings information up to January 2009. In addition, the commission was able to conduct further analysis of the current recession and seek more views from stakeholders.

The commission’s recommendations were published in May. It suggested that the adult rate, for workers aged 22 years and over, should increase by a modest 1.2 per cent. It also recommended that the other rates—that is, the rates for 18 to 21 year-olds, for 16 to 17 year-olds and the maximum amount for accommodation that is allowed to count towards pay for national minimum wage purposes—should also increase between 1.1 per cent and 1.3 per cent. We agree with the commission’s recommendations. They strike the right balance and ensure that low-paid workers are treated fairly. We estimate that nearly 1 million people stand to benefit from these increases.

The second change that the regulations will make, on the treatment of tips, also has at its heart issues of fairness. Since the national minimum wage came into being in 1999, it has been legal for an employer to use tips, service charges, gratuities and cover charges to count towards payment of the minimum wage where they are paid to a worker through the employer’s payroll. We have reviewed this position and have come to the conclusion that it is not right. The time is now right to ensure equity for all workers and create a level playing field in wages among employers, so that tips can no longer be used towards payment of the national minimum wage. This change will also benefit consumers, because when people leave a tip, in a restaurant or elsewhere, they expect it to go to the staff. Consumers have a right to know what actually happens to the tips that they leave in good faith. Regulation 5 therefore makes it clear that service charges, tips, gratuities or cover charges paid through the employer’s payroll will not count towards payment of the national minimum wage.

The third change that the regulations make is about ensuring consistent application of national minimum wage rules. It concerns the European Union’s lifelong learning initiative, which supports member states’ policies on employability, lifelong learning and social exclusion, and gives students the chance to gain work experience in other countries.

Work placements under one of the programmes under the lifelong learning umbrella, a scheme called Leonardo da Vinci, were specifically exempted from the national minimum wage in 2007. However, work placements carried out in the same way under two other programmes, Comenius and Erasmus, are not subject to the same exemption. Regulation 3 will ensure that work placements under both the Comenius and Erasmus programmes are exempt from the national minimum wage. We estimate that around 1,700 students a year are undertaking work placements under those programmes.

We should not stand by and let vulnerable or low-paid workers suffer particularly during this recession. At the same time, we have a duty to make sure that our regulations do not push struggling businesses over the edge. The measures contained in these regulations strike the right balance. For these reasons, I commend this instrument to the Committee. I beg to move.

I thank the Minister for introducing the regulations, which, at least in respect of the annual uprating, we debate each year. Before dealing with the annual uprating, I should say that we on these Benches welcome the fact that, in the hospitality industry, no deduction for tips will be made for purposes of assessing whether the minimum wage has been met. The old practice seemed to us to be unfair.

On the annual uprating, is the Minister aware of reports that people are being asked in the Government’s own jobcentres if they will accept wages below the national minimum wage? If such reports are true, do they not make a bit of a nonsense of the process, and are the Government taking any action on this?

Lastly, I would be interested to know what the Government would do if the Low Pay Commission—which has, after all, said that pressures on average earnings are on the downside and that forecast earnings in the fourth quarters of both 2009 and 2010 could prove optimistic—was in future to recommend a reduction in the minimum wage?

As the Minister will be aware, we on these Benches supported the introduction of the minimum wage and have been consistently supportive of the Government’s decisions in the 10 years since the minimum wage was introduced.

Two issues were discussed at length when these regulations were considered in another place. The first, obviously, is tipping. We certainly support both what the Government have done and what the noble Lord, Lord De Mauley, has indicated. Tipping vis-à-vis the minimum wage is not quite as straightforward an issue as it might seem on the surface because it has long been the practice in restaurants either to pool tips or to ensure that people who are not actually serving the meal receive a share of tips. People often say, “When we gave a tip in the restaurant we assumed that it would go to the waiter”, and they sometimes ask the waiter whether he will receive the tip for the service. However, there are often perfectly legitimate reasons why the individual waiter or waitress has not received 100 per cent of the tip, because the chef and the maitre d’ will receive a share, as will those who do the washing up. That is a perfectly legitimate practice. The regulations need to ensure that that practice is not discontinued as a result of the minimum wage deduction. But I am sure that it will not be, because properly run restaurants have been doing it for years while paying their staff properly.

The second issue which caused some debate in another place is the position that the Tory Party will take on the minimum wage should it get into government. The noble Lord, Lord De Mauley, may well indicate that that decision is slightly above his pay grade, or indeed his minimum wage grade; however, we on these Benches have watched with interest the change in the position that the Tory party has taken on this. It opposed the original Bill then, some years later, shifted its position when it was apparent that the minimum wage did not have the devastating effect on employers that the Tory Party had feared it might.

We on these Benches have always indicated that we support the minimum wage. That is particularly so when the Government have been taking into account the recommendations of the Low Pay Commission. It should not simply be a matter of a Minister saying, “We’ll put it up by x”. Were that to be the case, particularly bearing in mind the relationship between this Government and the trade union movement, there would always be a suspicion that objectivity was being lost. I know that the Minister himself cannot answer that, and the noble Lord, Lord De Mauley, has finished speaking in any event, but it would be interesting to know whether, were they to get into government, the Tories would support the continuation of the minimum wage, and whether they support the continuation of the Low Pay Commission.

I am pleased to see that the noble Lord, Lord De Mauley, welcomes the introduction of the amendment on tips, gratuities and so on. As I said earlier, the Low Pay Commission has the balance right on annual uprating. On people being asked in jobcentres whether they will accept less than the minimum wage, we would be appalled if that were the case. We are not aware of it. If the noble Lord has details, we will certainly check the situation and write to him to clear that up, so that there is no dubiety.

It would certainly not be appropriate to speculate about what might be the reaction to the Low Pay Commission’s recommendations in a hypothetical circumstance that may or may not happen. I welcome the comments of the noble Lord, Lord Razzall, and his point that the Liberal Democrats have always supported the introduction of the minimum wage; history has shown that.

On pooling, we are taking forward proposals on transparency and providing clear information for consumers about tips. We are working with businesses in the tipping sector, as well as consumer and worker groups, to develop best-practice guidance for business and clearer information for consumers. We have no intention of getting involved in the process of the tipping business. As the noble Lord, Lord Razzall, reminded us, pooling has been going for a long time. As long as it is not included in any calculations for minimum wage, determining the way forward is best left to individual businesses. However, clarifying the situation is certainly a good idea—such as for tipping by credit card, which is not always the best way to do so.

On the Opposition’s view of the minimum wage, I can only say that the dire predictions did not come about. They did not come about because we had a representative Low Pay Commission, excellently chaired by Sir George Bain, which took getting the right balance into account when the minimum wage was introduced. All my information was that if we got that right, it would have a positive effect. It did, and something like 2 million people benefited as a result. I think that I have answered all the questions.

Motion agreed.