CIPP response: April 2020 National Minimum Wage rates
17 June 2019
55% of employers have revised their pay structures as a result of the introduction of the National Living Wage (NLW).
This is one of the key findings from our research to inform our response to the Low Pay Commission’s (LPC) consultation on April 2020 National Minimum Wage rates.
The LPC is the independent body that advises the Government on the level of the minimum wage. To assist with its remit to recommend in October of this year the NMW and NLW rates to apply from April 2020, it published a consultation in March 2019.
The current target for the National Living Wage will be met (subject to sustained economic growth) by April 2020. In the 2018 Budget, the Chancellor stated his intention to give the LPC a new remit beyond 2020 so the LPC also invited views in its consultation on how the existing target for the NLW has worked and on potential future arrangements.
In order to collect the views of members of the payroll profession, which includes both in-house professionals as well as professionals working in the out-sourced payroll service sector (which includes bureaux, accountants and book-keepers), a survey ran throughout May and a Think Tank roundtable was held in Leeds in June, to which two representatives from the Commission met with a number of representatives from both the payroll and legal profession.
You can read the full CIPP response to the consultation on April 2020 National Minimum Wage rates, however in summary:
- 55% of employers have revised their pay structures as a result of the introduction of the National Living Wage (NLW)
- 21 % of employers who offer a reward package to their employees have seen an impact to it as a result of the NLW
- 41% of employers believes that the LPC should not seek to meet the target rate of the NLW
Whilst it is fair to say that a large number of the respondents to the survey still pay significantly in excess of the minimum wage rates, and it has not so far impacted the number of staff employed, nor the number of hours worked by staff, a growing number are beginning to feel the impact, and are concerned about:
- the numbers of employees who are being paid at or near the minimum wage
- the decreasing pay differentials for roles requiring additional qualifications or authority
- the impact on employee relations as a result of the diminishing differentials and growing number of employees being paid at or near the minimum wage
Looking ahead to the remit of the Low Pay Commission we are aware of increasing calls on the commission to monitor and recommend more than simply rates of minimum wage, and we would ask that the LPC not seek to ‘dilute’ its skills. The LPC has worked extremely well – a fact demonstrated by its continued existence and the esteem in which it is held. We would ask that the LPC continue doing what it does best – bringing together employers, workers and academics in a bid to set the rate of and monitor the impact of the minimum wage.
Ending low pay is an ambitious aspiration by the Government but increasing the minimum wage is only one step needed – wider review of state policy is required which includes:
- the impact of taxes – which includes NICs
- the impact of workplace pension saving
- the working of Universal Credit and the effective flow of data between HMRC and DWP.
We would ask that if the two/thirds of median pay be a future aspiration for the NLW then it be given an equally lengthy period of roll out with the backing of an improved information programme for employers.
We are grateful that the Commission has championed our calls for greater transparency within compliance and enforcement however this hasn’t yet come to fruition, indeed education material and guidance, other than in its simplest form, has yet to see any improvements.
We once again call for the creation of a cross departmental stakeholder forum that sees BEIS, HMRC, LPC and the Director of Labour Market Enforcement come together with interested stakeholders on a regular basis, to ensure the effective and informed delivery of minimum wage compliance.
Read the full CIPP response to the consultation on April 2020 National Minimum Wage rates, which includes the responses to our survey.
All consultation responses are available in the Policy hub under My CIPP on our website.