Clash of opinion over minimum wage increase

Leading HR and business representatives have clashed over whether the national minimum wage should be frozen or raised during the recession.

With the Low Pay Commission set to report to government tomorrow on its proposals for any modifications to the minimum wage this year, agreement cannot be reached on what the best outcome for businesses would be.

The government raised the minimum wage from £5.52 to £5.73 in 2008.

David Yeandle, head of employment policy at manufacturing body EEF, told Personnel Today the government should implement a “modest” increase in the minimum wage, but this should not exceed 1.8%.

He said: “In manufacturing we are seeing average pay settlements of around 1.7-1.8%, and anything more than that for the minimum wage will raise questions.”

Putting pressure on the government to implement a freeze on the minimum wage would end up costing companies more in the long run, he explained.

“I am nervous about calling for a freeze because it would provide an opportunity for the government to give a bigger increase next time round. Companies can cope with a modest increase now.” he added.

The Charted Institute of Personnel and Development (CIPD), however, has urged the government to “hold off” on its annual increase in the minimum wage to allow businesses in hard-hit sectors to preserve jobs during the recession.

John Philpott, chief economist at the CIPD, said: “While [freezing the minimum wage] will be bitterly disappointing to the lowest paid in society, it reduces the risk of job losses in low paid sectors such as retail and leisure at a time when deflation on the RPI measure of inflation will limit the impact of a minimum wage pause on people’s real living standards.”

Meanwhile, Neil Carberry, head of employment and pensions at the CBI, has advised the commission to “proceed with utmost caution this year” as lower paying industries have been hurt by the recession.

Any changes made to the minimum wage will take effect on 1 October.

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