Manufacturers call for formula for minimum wage

Manufacturers have called for rises in the National Minimum Wage to be subject to a pre-determined formula to give greater certainty to employers.

The adult rate for the minimum wage is set to increase from its present hourly rate of £5.05 to £5.35 in October, after the government accepted the most recent recommendation of the Low Pay Commission. Unions have called for it to be boosted to £6.

The commission is consulting businesses about how the minimum wage is affecting employment and pay for different ethnic, age and gender groups. The commission will report to the prime minister and secretary of state for trade and industry by the end of February 2007.

In its submission to the consultation, EEF, the manufacturers’ lobby group, said that future increases in the minimum wage should be determined by a formula, based on movements in basic rates of pay across the economy.

This approach would help manufacturers to plan for the impact that these increases will inevitably have on their costs and remuneration arrangements, EEF claims.

The submission also argues that this formula would sometimes need to be adjusted by the Low Pay Commission to take account of legislative changes that will have a disproportionate effect on employers paying the minimum wage. These include the proposed increase in statutory holiday entitlement and the introduction of compulsory employer contributions for employees who decide to join the government’s proposed pensions saving scheme.      

David Yeandle, EEF deputy director of employment policy, said: “This [formula] would provide employers with greater certainty about the future impact on their businesses, which would then enable them to plan accordingly.” 

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