U-TURN THREAT TO MINIMUM WAGE

25th April 2008, 10:35am

The Government faces a growing storm from hospitality businesses after its plans to ask the Low Pay Commission to review the National Minimum Wage to compensate younger workers affected by the loss of 10p tax rate.

The British Hospitality Association's Bob Cotton said that he "went berserk" when he heard the plans but has since made informal contact with the LPC and was told the technical review would only involve the junior rate of 16 to 17 year olds.

But a Commission press officer has denied this and says that following contact from the first Secretary of State for Business, Enterprise and Regulatory Reform John Hutton the nine Commissioners are considering his request and will make a decision early next week.

Cotton says: "The sensible way for the LPC to operate is to consider economical data and analyses before fixing the rate for the coming year. And this has just taken place with rate rises due to come in October. Changes should not now take place to get the Government out of a hole."

Backing these views Jon Taylor of commercial law firm emw said: "It is a real shame that it may be employers that end up footing the bill for the Government's u-turn via yet another rise in the minimum wage.

"It is likely that any rise in the minimum wage to compensate those on low incomes will have to be a significant one, producing a hefty wage bill for employers over the long term, as once it has gone up, it will not come back down.

"Employers are already facing a rise in the rate for 18-21 year olds from £4.60 to £4.77 per hour in October. The national minimum wage for 18-21 year olds has risen by 53% since it was introduced in 1999 and there are signs that the rises are beginning to bite.

"Small high street retailers and the hospitality industry in particular, who tend to have the highest proportion of staff on minimum wage and who operate in a competitive environment on tight margins will be really concerned."

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