MEMBERSHIP INSIGHT
NMW/NLW impact
Samantha Mann MAAT, MCIPPDip, CIPP senior policy & research officer, reports the key discussion points from a recent Think Tank
L ate summer MHR hosted a CIPP policy Think Tank roundtable that saw members and others involved in minimum wage issues meet with the Low Pay Commission (LPC) as it looked to conclude its 2017 annual review of the national minimum wage (NMW) and national living wage (NLW). This annual review focussed on: ● evidence of the impact of increases in the NLW (both the 2016 introduction and the latest increase in April 2017) on workers, employers, the labour market and the economy ● the economic outlook following the vote to leave the European Union ● the impact of the new rate for those between 21 and 24 years old, including the effect that the gaps between the different rates have on different age groups’ labour market performance ● affordability and effects of possible future introduction of the NLW had increased the challenges for employers and considered whether more could be done to improve overall compliance, and if so were seeking views as to how. Following the roundtable introductions, LPC policy officer Joseph Cooper provided a background to the work of the Commission and its findings so far, which he delivered against the backdrop of a report the Commission had published in April 2017. This report described the impact – including latest evidence on the gains and risk – that has arisen from the higher pay floor which now exists due to introduction of the NLW. increases rates, particularly for 2018. The LPC focused on whether the
Topics shared during discussion included: ● Impact on pay differentials within businesses – With many members sharing their experiences of how pay differentials have been limited now because of the increase brought about with the NLW introduction, few if any members could report being able to increase pay rates across the board to match the increase brought in for the NLW workers. ...opportunity by government to ‘rob Peter to pay Paul’, which is not a sustainable policy... ● Increasing focus on profit levels – Many members reported their employers having taken a hit on profit levels so far, but a long-term drop in profits is not sustainable. In turn, this lead to discussion about how some contracts are not being bid for simply because the margins are too limiting where salary costs would see only minimum wage rates payable. Views were shared that the current government focus with minimum wage rates is increasingly being seen by many as an opportunity by government to ‘rob Peter to pay Paul’, which is not a sustainable policy. ● Employee relations – Setting aside the impact that tightened pay differentials are having on employee motivation, one member reported employees questioning why they didn’t receive 50p an hour increase
as promised by the media coverage that followed Georgie Osborne’s announcement that introduced the NLW. ● Impact on salary sacrifice – The impact of the minimum wage on employees being ineligible for salary sacrifice continues to be an issue that will increase as many employers have used salary sacrifice to support their delivery of automatic enrolment. This is an increasing issue with predictions of many employees having to be removed from such schemes as the rate for NLW increases to its target rate of 60% median earnings. Concern was expressed that many employees would simply look to come out of pension scheme savings as rates increase and their access to Class 1 National Insurance contributions savings removed. ● Impact across the pay increases company wide – One member reported that though NLW workers had received a 4.2% increase due to the large increase brought in with the NLW, an overall increase of just over 1% was achieved across the company; clearly equity in pay increases was not possible due to cost. ● Guidance available on minimum wage calculations – The Department for Business, Energy & Industrial Strategy (BEIS) owns the policy on NMW and NLW, and is responsible for publishing and updating guidance on calculating the NMW (recently updated in April 2017). Guidance is also available in a significantly simplified format, together with a simple NMW calculator, on GOV.UK. Concerns continue about how effective the guidance is in making clear to employers as to how the minimum wage
| Professional in Payroll, Pensions and Reward | October 2017 | Issue 34 8
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