Managing Employee Pay & Benefits
NMW could be put on 'emergency break'
A report by the Sunday Telegraph suggests that the Government may be considering scrapping the annual increase of the National Minimum Wage (NMW) and National Living Wage (NLW) in 2021. The rates are usually reviewed and increased in April of each year.
This news comes as the impact of the coronavirus on the financial stability of many employers raises questions as to whether further wage increases would be affordable. It is likely, according to the newspaper, that Chancellor Rishi Sunak will be making the announcement in the upcoming Budget this Autumn.
In the fourth quarter of 2019, the Government pledged that it would increase the NMW to reach "60% of median earnings in the next four years." However, the Low Pay Commission – the organisation which advises the Government on minimum wage uprating – has stated that the Government may have to withdraw from this plan in order to help businesses recover economically.
The Chair for the Low Pay Commission, Bryan Sanderson, has said that: "There are not many winners in today's uncertain world. Our contribution to help steer a path through the complexity will be to provide a recommendation founded on rigorous research and competent analysis which has the support of academics and both sides of industry."
On the other hand, the Trade Union Congress (TUC) has raised the point that an 'emergency break' would be the wrong move, especially for key workers who have not stopped working, even during the peak of the pandemic. Frances O'Grady, General Secretary of the TUC expressed her view that rates should be increased to reflect the 'real living wage' which is currently paid on a voluntary basis by approximately 6,000 employers. It's currently £10.75 per hour in London, and £9.30 in the rest of the UK.
She continued by saying that "[t]he government must not renege upon its commitment to raise the minimum wage. Millions of low-paid workers are struggling to make ends meet. That's not right during a pandemic – or at any time". Her sentiments were shared by Andy Burnham, the Mayor of Greater Manchester.
Many employers would welcome an 'emergency break' because it removes the annual compulsory pay rise for employers who pay their employees at the minimum rate. However, recent reports of employers returning the money they claimed from the Job Retention Scheme to cover the wages of furloughed employees may indicate that some have assessed their financial position as more favourable than envisaged. This could mean that employers may still choose to increase the wages of their lowest paid employees next year even in the absence of a legal requirement to do so.