Glasgow Employment Law Blog

The Government has approved a rise in the National Minimum Wage to £6.50 per hour later this year, with more than one million people set to see their pay rise by as much as £355 a year.

The current minimum wage system is no longer fit for purpose and needs reform if it is to repeat the successes of its first 15 years.

Britain’s growing minimum wage workforce includes 320,000 people who have been trapped on the lowest rung of the pay ladder for five years or more, according to a new report from the Resolution Foundation.

Research from the Federation of Small Businesses (FSB) has found that half (49%) of small businesses with employees on the National Minimum Wage have either increased wages in the last 12 months or are considering raising pay. The data shows less than a quarter (23%) of small firms have any staff on minimum wage, down from 27% in 2012.

According to a new report on job turnover from the CIPD, the proportion of workers leaving their employer at any given time fell by over two fifths between 1998 and 2012, presenting businesses with challenges in establishing cultures of innovation, but equally allowing for invaluable long-term retention of employee knowledge and skills.

There have been recent proclamations by the Labour Party and the Scottish Executive that they will look to pay workers a "living wage" rather than simply the minimum wage.

What is the living wage? The living wage has no legal force and is entirely voluntary. The Living Wage Foundation has campaigned for the introduction of a wage that will allow workers to live a decent life, meaning that they are able to secure the essentials of life through their earnings.

The latest calculation of the living wage is for an hourly rate of £7.45 for those outside London and £8.55 for those in London ( to reflect the higher cost of living there). The recognition of higher living costs in London is interesting as it does not allow for any other adjustments of the rate  throughout the country, despite the fact that living costs can vary greater within the UK.

Where does this leave the minimum wage? Minimum wage rates are officially binding on employers and are much lower than the living wage rate. Employers cannot pay less than minimum wage ( £6.19 for those over 21, £4.98 for those over 18 and £3.68 for 16 and 17 year olds ) . By implication these rates are at a level where the worker cannot earn enough through that work to meet some of the essentials of daily life, as judged by The Living Wage Foundation.

Uptake by employers has been slow in relation to committing to the living wage but in due course more and more companies will sign up to paying workers at this rate. It may in due course lead to the minimum wage simply being a safety net for employees to ensure that certain employers don`t seek to take advantage of cheap labour and that the vast majority of workers receive a wage that allows a more realistic chance to secure the basics in life.

If you are an employer or employee affected by such issues then please contact our employment lawyers to discuss the implications of the living wage and  the minimum wage.