The government has recently asked the Low Pay Commission (LPC) to prepare a further report on the National Minimum Wage (NMW) and to report on this to the Prime Minister and the Secretary of State for Trade and Industry by the end of February 2007.
The terms of reference for the LPC's Report are set out below:-
"To continue to monitor, evaluate and review the NMW and its impact, with particular reference to the effect on pay, employment and competitiveness in the low paying sectors and small firms; the effect on different workers, including different age groups, ethnic minorities, women and people with disabilities; the effect on pay structures; and taking into account the forthcoming changes to the statutory annual leave entitlement."
EEF has been asked by the LPC to submit evidence on the NMW and, in particular, its views on any of the issues covered by the above terms of reference or on other aspects of the NMW, such as enforcement, with this evidence having to be submitted to the LPC by 20 September 2006.
On the last few occasions that EEF has submitted evidence on the NMW to the LPC, we have argued that, in order to provide EEF members with greater certainty about the future cost implications for them of any increases in the NMW, future increases should be based on a pre-determined formula, namely the movement in basic rates of pay across the economy over the previous 12 months.
As Associations and members of the Committee will see from the terms of reference for the LPC’s next Report, it is being asked to take into account the Government's planned increase in the statutory annual leave entitlement from 20 to, eventually, 28 days.
This increased annual leave entitlement is expected to impact most significantly on smaller companies and those companies which are paying the NMW to their employees.
A further legislative change that the PLC will have to take into account in the relatively near future is the government's planned introduction of its new pension saving scheme into which, from 2012, eligible employees without access to an exempt "good" occupational pension scheme will have to be automatically enrolled by their employer.
If they decide to join this scheme, employees must contribute a minimum of 4% of a band of earnings (currently £5,000pa to £33,000pa) and their employer a minimum of 3% of the same band of earnings.
Like the planned increase in statutory annual leave entitlement, the introduction of this new pension saving scheme is likely to have the most significant impact on smaller companies and those companies paying the NMW to their employees.
The views of Associations and members of the Committee are sought on the NMW and, in particular, on whether EEF should continue to argue in its evidence to the LPC that future increases in the NMW should be calculated in accordance with a pre-determined formula.
Views are also sought on how the LPC should take into account the forthcoming increase in statutory annual leave entitlement and the introduction of the new pension saving scheme.