CIPP response to consultation for evidence on the National Minimum Wage
12 July 2017
The CIPP has submitted its formal response which is intended to provide evidence of the impact that the NMW and NLW rates are having, and will continue to have, on businesses.
The CIPP has collected the views of its members and others within the payroll profession through the use of an electronic survey. The survey ran from 13 June until 5 July 2017 and received a total of 55 responses.
Summary of key findings
- 82.5% of respondents report that their paybill has increased since the introduction of the National Living Wage (NLW)
- 80% of respondents state that the NLW has not affected the total number of jobs in the business
- 22.5% report that they have reduced the overall number of hours worked in the business
- Almost 80% say that the business is now making more use of zero hours contracts
- 60% of respondents report that staff turnover has reduced as a result of the NLW
- The majority of respondents (61.5%) state that the NLW has not affected premium and overtime pay in the business
- Responses are divided as to the effect of NLW on pay differentials, with the same number (48.6%) saying pay differentials have been maintained as saying they have reduced
- More than three quarters of respondents (76.9%) report the NLW has had no effect on the total benefits package offered by their business
- An overwhelming 92.5% of respondents report that the NLW has had no effect on the age profile of the workforce
- 94.8% of respondents report that the introduction of NLW has not affected the number of workers employed below the age of 25
- No respondents say that the increased apprentice rate has affected the number of apprentices they employ, with almost 44% saying they pay above the apprentice rate
- 41% of respondents state that the introduction of the Apprenticeship Levy has encouraged them to employ an apprentice
- More than 80% say they have no problems complying with the NMW or NLW
- Many respondents raised concerns about the impact the introduction of the NLW has had on salary sacrifice arrangements
- Though several respondents feel the introduction of the NLW has been a positive move, concerns have been raised about the reduced ability to reward staff for skills and experience
- Several respondents suggested the NLW rates should be based on abilities rather than age
Conclusion
Whilst the introduction of the NLW does not seem to have had a significant impact on the number of actual jobs, it would appear that the number of hours worked has been affected, with 80% of respondents reporting an increase in the use of zero hours contracts.
Whilst respondents say there has been no change in the age profile of their workforce as a result of the NLW being introduced, several respondents suggested that skills and experience rather than age should be a determining factor in the amount an individual is paid.
Whilst the majority of respondents have not experienced any difficulties complying with the NMW or NLW, the impact NLW has on the ability of low paid workers to pay for benefits such as a pension through a salary sacrifice arrangement is a cause of concern for many.
Recommendations
Creating a situation where the lowest paid workers are unable to benefit from the advantages afforded from paying for pension contributions or childcare through a salary sacrifice scheme appears to be counterproductive.
The CIPP recommends that the Low Pay Commission approaches the government with a view to reviewing this situation.
The CIPP also suggests that the Low Pay Commission considers whether there are any other means of differentiating between NMW and NLW pay rates than simply the age of the worker.
The full survey results are available in the CIPP response to consultation for evidence on the National Minimum Wage.