National Minimum Wage Act 1998
From Wikipedia, the free encyclopedia
The National Minimum Wage Act 1998 [1] 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 (NMW) took effect on 1 April 1999.
No national minimum wage existed prior to this date, although there were a variety of systems of wage controls 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 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 (as of 1 October 2007)[2]:
- £5.52 per hour for 22-year-olds and older (this has risen since 1999 from the initial £3.60 an hour).
- £4.60 per hour for 18-to-21-year-olds
- £3.40 per hour for under-18s who have finished compulsory education[3]
- 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)
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 counted as pay, with the exception of tips that are distributed through the payroll system.
The policy is criticised for its separate tier of payment for 18–21 year olds, who are expected to pay tax, or pay £3,070 per year in top-up fees for university, and pay National Insurance, yet can still be paid 92p per hour less than other adults.[4]
To put the pay in an annual perspective, an adult working at the minimum wage for 7 hours a day, 5 days a week, over the age of 22 will make, in 48 weeks (approximately the amount of working weeks in a year, taking off sick leave, holidays and bank holidays), £38.64/day, £193.20/week, and £9,273.60/year.
The minimum wage will rise on 1 October 2008:
- 22-year-olds and older: £5.73 per hour
- 18 to 21-year-olds: £4.77 per hour
- 16 to 17-year-olds: £3.53 per hour[5]
[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 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 (ss.43–5).
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.
[edit] Enforcement
The NMW is enforceable by a contractual claim or through s.13 of the Employment Rights Act 1996 or if the exploited worker demands to see his employer’s records and is refused. S.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 (s.25 and s.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 (s.14) provides more help. Inspectors may order compliance and payment (s.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.
[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[6]. The figures are based on data from the Annual Survey of Hours and Earnings.
[edit] See also
- Tax Credits — and Child tax credit, Working tax credit
- Wage regulation
- Revenue & Customs Commissioners v. Leisure Employment Services Ltd
[edit] References
- ^ National Minimum Wage Act 1998. Retrieved on 2007-12-29.
- ^ "Minimum wage up to £5.52 an hour", BBC News, 2007-3-7.
- ^ National Minimum Wage. Her Majesty's Revenue and Customs. Retrieved on 2007-12-29.
- ^ "Age Law 'threat to minimum wage'", BBC News, 2006-9-29.
- ^ Minimum wage will rise to £5.73
- ^ Low Pay Estimates. Office of National Statistics. Retrieved on 2007-12-29.
[edit] External links
- Official text of the statute as amended and in force today within the United Kingdom, from the UK Statute Law Database
- Her Majesty's Revenue and Customs: National Minimum Wage
- National Minimum Wage and Small Business
- The London minimum wage debate
- London should have £6.50 minimum wage
