While business organisations complained loudly about the rise in the national minimum wage (NMW) to £5.35 an hour in October 2006, few employers see the current rate as a problem, according to a study by Personnel Today’s sister publication Employment Review.
A survey of 150 organisations, which together employ 936,508 people, found that almost half (48%) agreed with the current rate, while nearly four out of 10 (39%) said it should be higher still. Just one in 20 (5%) said the pay floor should be abolished altogether.
Although the great majority (87%) back the NMW at its present level or higher, there are signs that this support is slipping. A similar Employment Review survey two years ago found 94% support for the NMW at its then rate of £4.85.
One respondent said: “I do not think the increases we have seen over the past two to three years are sustainable.”
By far the largest group of remuneration and HR managers (47%) said that their organisation had not been affected by the most recent increase in the NMW. A further one in four (23%) said its impact had been positive to some degree, while just 7% said they had suffered negative effects.
The survey found that public sector organisations were most likely to have a positive view of the NMW and to want it to be higher than it currently is. Private sector services companies, meanwhile – particularly those with more than 1,000 employees – had the most negative view.
…but pay differentials are under pressure
The most significant problem created by rises in the national minimum wage is that it makes it hard to maintain differentials between different employee groups, the Employment Review research shows.
Three out of 10 of those surveyed (30%) said that they were unable or unwilling to increase pay for higher-earning employees at the same rate as for those covered by the NMW, reducing the rewards for employees moving up the career ladder.
Others said increased staff costs had fed through into the prices they charged for products and services (14%). But relatively few said that they had cut staff hours (10%) or employee numbers (8%) as a result, and fewer still had clawed rises back by cutting benefits (2%).
More significantly, few organisations want to be seen as ‘minimum wage employers’. More than seven out of 10 strongly agree (20%) or tend to agree (53%) that there is pressure to pay staff above the NMW rate.
A significant minority (40%) also agree to some extent that pay rises enforced through the NMW leave little room to reward staff based on their performance.
…and many want to see more variation
While some may argue that the whole point of the national minimum wage is that it is national, nearly one in three (30%) of those surveyed thought it should be paid at different rates in different parts of the country.
Smaller numbers wanted to see differences in the pay floor depending on organisation size (14%) or on the industry sector in which it operated (19%). Support for variation by size was strongest in small businesses, while larger organisations backed sectoral variations.
Although one in four (25%) of those questioned were in favour of the continuation of current differences based on age, half (50%) wanted to abolish the development rate for younger employees.