National Minimum Wage

House of Lords written statement – made on 22nd April 2013.

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Photo of Viscount Younger of Leckie Viscount Younger of Leckie The Parliamentary Under-Secretary of State for Business, Innovation and Skills

My right honourable friend the Secretary of State for Business, Innovation and Skills (Dr Vince Cable) has today made the following Statement.

The Low Pay Commission's 2013 report and recommendations to the Government are being published today, alongside the Government's response.

The Low Pay Commission's 2013 report

The main recommendations put forward by the Low Pay Commission concern the rates of the national minimum wage. The Commission has recommended that the adult hourly rate of the national minimum wage should increase from £6.19 to £6.31. The Commission has recommended increasing the development rate, which covers workers aged 18-20 year-olds, from £4.98 to £5.03 and increasing the rate for 16-17 year-olds from £3.68 to £3.72. It recommends that the apprentice rate should remain at £2.65. It recommended that these changes take place in October 2013.

The Commission has also recommended that the accommodation offset increases from the current £4.82 to £4.91 in October 2013.

The Government accept the recommendations on the adult and youth rates, and on the accommodation offset, but has concluded that the apprentice rate should be increased by 3p to £2.68 from 1 October 2013.

Government's response to individual recommendations in the Low Pay Commission's 2013 report

National minimum wage rates

We recommend that the adult rate of the national minimum wage be increased by 1.9%, or 12 pence, to £6.31 an hour, from 1 October 2013.

We recommend an increase of 1.0% in the youth development rate to £5.03 an hour and in the 16-17 year-old rate to £3.72 an hour from 1 October 2013.

We recommend that the accommodation offset be increased by 1.9%, to £4.91 a day, from 1 October 2013.

Accept

We recommend that the apprentice rate should remain at £2.65 an hour from 1 October 2013.

Reject

The Government share the commission's concern about non-compliance with the apprentice minimum wage and we are clear that employers must pay their staff at least the minimum wage. However, we believe that it is important to maintain the relative position of the apprentice rate compared to benefits and the youth rates to preserve the attractiveness of apprenticeships for young people. The Government have concluded therefore that a 1% increase in the apprentice rate would be appropriate. This is in line with the recommended increases in the youth rates; evidence in the commission's report shows that the majority of apprentices paid on and just above the apprentice rate are young people. It is also the planned level of public sector pay and benefit increases. We consider that the modest level of this increase would not have significant adverse effects on employment or training for apprentices. In conjunction with this, we are putting in place a package of measures to improve compliance, including focused communications and targeted enforcement by HM Revenue and Customs.

Accommodation offset

We recommend that the accommodation offset should remain the only permitted benefit in kind that can count towards payment of the national minimum wage and there should be only one rate. It should apply irrespective of whether the worker has a choice over taking the accommodation.

Accept

Salaried-hours workers

We recommend that the regulations for salaried-hours workers continue to be required in all their essentials. In order to make it as simple and easy as possible to achieve national minimum wage compliance the Government should adapt their guidance to include examples and an online means of determining what payment is required.

Accept

Compliance

We recommend that the Government should combine a communications campaign and a targeted enforcement initiative to ensure that the apprentice rate is known to employers and apprentices, and that infringers are caught, punished, and wherever appropriate, named.

Accept

The Government believe that this recommendation should be viewed alongside the apprentice rate recommendation. The Government accept this recommendation and in fact go further than is proposed. There will be a multifaceted push on non-compliance in this area.

We recommend that contracts issued by public bodies which commission the provision of social care should contain a clause requiring at least the national minimum wage to be paid, just as they may require compliance with other aspects of the law, such as health and safety legislation. The Government should take responsibility for bringing this about.

Note

The Government fully agree with the commission's aim of reducing non-compliance in this sector. However, we believe there are more effective ways to achieve this. The Department of Health and the Department for Communities and Local Government are working together to develop tougher measures to deter non-compliance as well as support to improve compliance.

The Low Pay Commission's report has been presented to Parliament today (Command Paper 8565).