National Minimum Wage Act 1998
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The National Minimum Wage Act 1998 was a flagship policy of the Labour Party in the UK during its 1997 election campaign and is still pronounced today in New Labour Party circulars as an outstanding gain for ‘at least 1.5 million people’. The National Minimum Wage took effect on 1 April 1999.
Prior to this date, no national minimum wage existed, although there were a variety of systems of wage controls, usually focussed on specific industries. 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 of the fact that the employees most vulnerable to low pay (especially in service industries) were rarely unionised in the first place.
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[edit] Overview
The following minimum wage amounts apply:
- £5.35 per hour for 22-year-olds and above
- £4.45 per hour for 18-to-21-year-olds
- £3.30 per hour for under-18s who have finished compulsory education
- None for those who have not yet finished compulsory education (the age when a person finishes compulsory education is either 15 or 16, depending on where their birthday falls in the school year)
The adult rate has risen since 1999 from the initial £3.60 an hour. A £4.15 a day deduction can be made for living accommodation. No extra benefits such as redundancy, pension payments, loans, or awards can be included as pay. An exception is that if tips are distributed through the payroll system, then the employer can calculate that as part of the minimum wage.
The policy is criticised for having a separate tier of payment for 18-21 year olds, who are expected to pay tax, or pay £3000 per year for university, and pay National Insurance, yet can still be paid 90p per hour less than other adults.
[edit] Details
The National Minimum Wage Act 1998 is universally applicable to ordinary ‘workers,’ [s.1(2)] that is, anyone who has a contract to do work, except for a consumer or a client [s.54(3)]. Expressly included are those working through job agencies [s.34], so they have a duty not to let their profits rake into a worker’s basic entitlement. Home-workers are also included expressly, and the Secretary of State can make order for other inclusions. The SS can also make exclusions, as has been done for au pairs and family members in family business. Those engaged in accredited training can have their entitlement reduced proportional to the hours undertaken. Excluded by the Act are fishermen paid in a share of profits, unpaid volunteers and prisoners (ss.43-5).
Hours are 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.
[edit] Enforcement
The NMW provides a useful definition for ‘exploited,’ as Parliament has decided that pay below that rate is unacceptable. But by definition, those who are exploited are often too helpless to exploit the opportunities to end their exploitation. The NMW is enforceable by a contractual claim or through s.13 of the Employment Rights Act 1996 or if the exploited worker is bold enough to demand to see his employer’s records and is refused, s. 18 NMWA gives him compensation to the order of 80 times the minimum wage. But this ignores the fact that many will not want to take any action, because they think it would mean an end to their employment. So s.25 and s.23 where employers may not subject their workers to dismissal or any other detriment, may in many cases be a red herring until the employment relation has come to an end. Even then, there are instances where many would still not enforce their rights, such as illegal immigrants, who know they face being sent home if they claim. Administrative enforcement by Inspectors under s.14 provides more help. Inspectors may order compliance and payment (s.19). That may be appealed by the employer, but ongoing failure to comply means cumulative penalties. The shortcomings of this are the resources given to inspect. Like the National Minimum Wage rate itself, that depends on the next election manifestos.
[edit] Statistics
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. The figures are based on data from the Annual Survey of Hours and Earnings.
Ironically, in October 2005, some staff from the Office for National Statistics were themselves being paid below the national minimum wage.[citation needed]
