EEF response to the Low Pay Commission for National Living Wage and Minimum Wage rates for 2018

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EEF has submitted its response to the Low Pay Commission's 2017 consultation on the National Living Wage and National Minimum Wage rates for 2018.

Summary of our response:

  • For the majority of EEF members both the introduction of the National Living Wage (NLW) at a rate of £7.20 per hour and the subsequent increase to £7.50 per hour has not required them to make a vast number of pay increases to comply with this rate, with the majority already paying their employees above these rates.
  • Increases to the other National Minimum Wage (NMW) rates have again had an even smaller impact. Manufacturers continue to tell us that pay structures are very much dependent on the job role, skill level and experience of that employee. Over eight in ten (83%) of EEF members agreed that a 22 and 26 year old employee in their company doing the same job role with the same level of experience are paid the same.
  • Manufacturers have welcomed recent increases to the Apprentice Rate but still believe it can go further, in particular, in light of the Apprenticeship Levy, an increase to the Apprentice Rate would go some way to safeguarding quality and protecting the apprenticeship brand.
  • The Low Pay Commission should continue its current trajectory towards getting the NLW to 60% of median earnings by 2020 but be mindful that as we get nearer to this date, and indeed the figure of 60% of median earnings, more employers will feel the bite and need to increase pay for some employees who may not be at the current rate.
  • Employers will also want to know what the direction of travel will be for the NLW post-2020. The 60% of median earnings target has provided them with some guidance making it easier to plan. However, many will be planning beyond 2020 and it is important that employers are aware of what will happen afterwards. The Low Pay Commission should then explore options post-2020 including the proposal to increase the NLW in line with increases to median earnings.

Key recommendations from our response:

  1. The LPC should continue its current trajectory of getting the NLW to 60% of median earnings by 2020.
    • A straight-line approach continues to give employers a degree of certainty about future rises and allows them to better plan for the future.
    • This should continue to remain subject to economic shocks such as the potential impact of Brexit, which are still unknown among manufacturers.

       

  2. The LPC should explore the options for the NLW post-2020 including the proposal to increase the NLW in line with increases in median earnings.
    • Employers are already planning ahead to 2020 and beyond. While the target of 60% of median earnings has offered them some certainty until now, questions are already being asked about what will happen after this.
    • The LPC should explore what direction of travel the NLW should take post 2020 including the proposal to increase the NLW in line with increases to median earnings. As well as looking at the case for this, the LPC should also review the impact this would have on the other national minimum wage rates.

       

  3. The LPC should also explore whether there is a need to retain all five rates of pay.
    • Manufacturers do not use the other national minimum wage rates and instead use a pay structure based on the job role, skill level and experience of the employee. The NLW has become the pay base line for all ages.
    • Therefore, the LPC should explore whether there is a need to retain all five rates in their current form.

       

  4. The LPC should recommend an increase to the Apprentice Rate above that of previous years by paying apprentices their age-specific rate.
  • The current Apprentice Rate structure needs to be reformed.
  • The introduction of the Apprenticeship Levy risks employers rebadging previous training, and indeed permanent employment as an “apprenticeship” and paying lower rates of pay.
  • To safeguard the apprenticeship brand and to put in place quality assurances the Apprentice Rate should be increased.
  • The simplest way to achieving this would be to pay apprentices their age specific rate from day one.

 

How has/does the National Living Wage and National Minimum Wage increases affected your company? Have your say by speaking to the Policy Team.


Are you paying the market rate for your jobs? Check out EEF's pay benchmarking to find out. Want to know the latest pay settlement data? We have that too here.

Author

Head of Education & Skills Policy

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