National Minimum Wage Act 1998

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National Minimum Wage Act 1998

Parliament of the United Kingdom
Long title An Act to make provision for and in connection with a national minimum wage; to provide for the amendment of certain enactments relating to the remuneration of persons employed in agriculture; and for connected purposes.
Chapter 1998
Territorial extent England and Wales; Scotland; Northern Ireland
Dates
Royal Assent 1998
Status: Current legislation
Text of statute as originally enacted
Revised text of statute as amended
This article is about an Act of Parliament in the United Kingdom. For other uses, see NMWA (disambiguation).

The National Minimum Wage Act 1998 creates a minimum wage across the United Kingdom, currently £6.19 per hour for workers aged 21 years and older, £4.98 per hour for workers aged 18–20.[1] It was a flagship policy of the Labour Party in the UK during its 1997 election campaign and is still pronounced today in Labour Party circulars as an outstanding gain for ‘at least 1.5 million people’. The national minimum wage (NMW) took effect on 1 April 1999.

Contents

Background[edit]

No national minimum wage existed prior to 1998, although there were a variety of systems of wage controls focused on specific industries under the Trade Boards Act 1909.

Part of the reason for Labour's minimum wage policy was the decline of trade union membership over recent decades (weakening employees' bargaining power), as well as a recognition that the employees most vulnerable to low pay (especially in service industries) were rarely unionised in the first place. Labour had returned to government in 1997 after 18 years in opposition, and a minimum wage had been a party policy as long ago as 1986 under the leadership of Neil Kinnock.[2]

The implementation of a wage was opposed by the Conservative Party and supported by the Liberal Democrats and the Labour Party[3]

Overview[edit]

The NMW rates are reviewed each year by the Low Pay Commission, which makes recommendations for change to the Government.

The following rates apply as of 1 October 2012:[4]

  • £6.19 per hour for adult workers (21+)
  • £4.98 per hour for 18-to-20-year-olds
  • £3.68 per hour for under-18s who have finished compulsory education
  • £2.65 per hour for apprentices under 19 years old or 19 or over and in the first year of their apprenticeship
  • Those who have not yet finished compulsory education have no entitlement to NMW. The age when a person finishes compulsory education is either 15 or 16, depending on where their birthday falls in the school year.

Law[edit]

The UK's National Minimum Wage over time.

The National Minimum Wage Act 1998 is universally applicable to ordinary workers (section 1(2)), that is, anyone who has a contract to do work, except for a consumer or a client (section 54(3)). Expressly included are those working through job agencies (section 34), so that the agencies' charges must not eat into a worker's basic entitlement. Home-workers are also included expressly, and the Secretary of State can make order for other inclusions. The Secretary of State can also make exclusions, as has been done for au pairs and family members in family business. Excluded by the Act are fishermen paid in a share of profits, unpaid volunteers and prisoners (sections 43-45).

The hours that are used in a national minimum wage calculation are dependent upon work type as defined within the National Minimum Wage Regulations 1999. The different work types are time work, salaried hours work, output work and unmeasured work. Hours to be paid for are those worked in the "pay reference period", but where pay is not contractually referable to hours, such as pay by output, then the time actually worked must be ascertained. The principle is a very basic one: that hours worked should never as a whole be paid below the minimum. Excluded from "worked" are periods when the worker is on industrial action, time travelling to and from work and absent periods. When a worker is required to be awake and available for work, then they must also be paid, however this does not prevent so called "zero hour contracts" being used. That means you are guaranteed no hours, theoretically you are under no obligation, but it is strongly in your interest to be ready to work if your employer requests.

Enforcement[edit]

The NMW is enforceable by a contractual claim or through section 13 of the Employment Rights Act 1996 or if the exploited worker demands to see his employer's records and is refused. Section 18 provides for compensation to the order of 80 times the minimum wage. Employers must not subject their workers to dismissal or any other detriment (section 25 and section 23). Nevertheless employees may not wish to take the risk while employed. (Some employees might not enforce their rights even if dismissed, such as illegal immigrants, who face being sent home if they claim.) Administrative enforcement by Inspectors (section 14) provides more help. Inspectors may order compliance and payment (section 19). This may be appealed by the employer, but ongoing failure to comply entails cumulative penalties. However, the effectiveness of inspection is limited by the resources given to inspect.

Case law[edit]

Statistics[edit]

Comparisons of the changes in the National Minimum Wage to average earnings and inflation. The minimum wage has grown well ahead of both.

The Office for National Statistics produces information about the lower end of the earnings distribution and estimates for the number of jobs paid below the national minimum wage.[5] The figures are based on data from the Annual Survey of Hours and Earnings.

Perspectives[edit]

The policy was opposed by the Conservative party at the time of implementation, who argued that it would create extra costs for businesses and would cause unemployment. The Conservative party's current leader, David Cameron, said at the time that the minimum wage "would send unemployment straight back up".[citation needed] However, in 2005 Cameron stated that "I think the minimum wage has been a success, yes. It turned out much better than many people expected, including the CBI."[6] It is now Conservative Party policy to support the minimum wage.[7]

The current Mayor of London Boris Johnson, a Conservative, has supported the London Living wage since coming to office, ensuring that all city hall employees and subcontracted workers earn at least £7.60 an hour and promoting the wage to employers across the city. In May 2009 his Greater London Authority Economics unit raised the London Living Wage for City Hall employees to its current rate of £7.60, £1.80 more than the then minimum wage of £5.80.[8]

To put the pay in an annual perspective, an adult over the age of 22 working at the minimum wage for 7.5 hours a day, 5 days a week, will make £942.50/month and £11,310/year Gross Income. After PAYE this becomes £810.63/month or £9,727.55/year (2009/2010)[9][10][11] Full-time workers are also entitled to a minimum of 5.6 weeks paid holiday per year from 1 April 2009, with pro-rata equivalent for part-time workers. This includes public holidays.[12]

Dominic Raab called for the National Minimum Wage to be scrapped for 16-21 year olds in order to boost youth employment,[13] though doubts were raised as to whether or not this would be an effective measure.[14]

Current and past rates[edit]

This table shows the current and past rates and is correct as of October 2012.[15]

From Adult Rate Development Rate 16-17 Year Olds Rate Apprentice Rate
1 Oct 2012 £6.19 £4.98 £3.68 £2.65
1 Oct 2011 £6.08 £4.98 £3.68 £2.60
1 Oct 2010 £5.93 £4.92 £3.64 £2.50
1 Oct 2009 £5.80 £4.83 £3.57 –
1 Oct 2008 £5.73 £4.70 £3.53 –
1 Oct 2007 £5.52 £4.60 £3.53 –
1 Oct 2006 £5.35 £4.45 £3.40 –
1 Oct 2005 £5.05 £4.25 £3.30 –
1 Oct 2004 £4.85 £4.10 £3.00 –
1 Oct 2003 £4.50 £3.80 £3.00 –
1 Oct 2002 £4.20 £3.50 – –
1 Oct 2001 £4.10 £3.50 – –
1 Oct 2000 £3.70 £3.20 – –
1 Apr 1999 £3.60 £3.00 – –

See also[edit]

Notes[edit]

  1. ^ The National Minimum Wage rates
  2. ^ [1]
  3. ^ "National Minimum Wage Bill — 16 December 1997". The Public Whip. Retrieved 3 January 2013. 
  4. ^ "The National Minimum Wage". 2010-10-01. 
  5. ^ "Low Pay Estimates". Office for National Statistics. Retrieved 2007-12-29. 
  6. ^ Rawnsley, Andrew (2005-12-18). "I'm not a deeply ideological person. I'm a practical one". The Guardian (London). Retrieved 2010-05-19. 
  7. ^ "The Conservative Party | News | Speeches | George Osborne: On Fairness". Conservatives.com. Retrieved 2011-09-21. 
  8. ^ [2][dead link]
  9. ^ "HM Revenue & Customs: Income Tax allowances". Hmrc.gov.uk. Retrieved 2011-09-21. 
  10. ^ "HM Revenue & Customs: National Insurance Contributions". Hmrc.gov.uk. 2011-06-28. Retrieved 2011-09-21. 
  11. ^ "UK PAYE Income Tax Calculator 2011 salary calculator UK. Updated for 2011 / 2012 tax year. Calculate wages pension national insurance and student loan repayments online". Listentotaxman.com. Retrieved 2011-09-21. 
  12. ^ "Holiday entitlements: introduction : Directgov - Employment". Retrieved 2008-08-08. 
  13. ^ http://conservativehome.blogs.com/platform/2011/11/dominic-raab-mp-small-firms-and-start-ups-are-being-stifled-by-red-tape.html
  14. ^ http://www.agediscrimination.info/News/Pages/ItemPage.aspx?Item=585
  15. ^ Low Pay Commission. Home page. Retrieved on 11 October 2012.

References[edit]

  • B Simpson, ‘A Milestone in the Legal Regulation of Pay’ (1999) 28 ILJ 1, 17-18
  • B Simpson, ‘The National Minimum Wage Five Years On’ (2004) 33 ILJ 22

External links[edit]

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