National Minimum Wage

Chapter 2: The Impact of the National Minimum Wage
the impact on pay structures, the British Hospitality Association (BHA), British Beer & Pub
Association (BBPA), and Business In Sport and Leisure (BISL) said members had been clear
that the rising minimum wage had squeezed differentials and reduced the scope for non-pay
benefits. The Association of Licensed Multiple Retailers (ALMR) said its survey of members
had confirmed that the minimum wage had become the average wage for the bar sector,
with just over half of respondents paying between £5.93 and £6.08 an hour. It noted that the
proportion was down when compared with the previous survey, but this was because there
had been a marked shift towards less expensive workers and the lower age rates of the
minimum wage.
2.65 The Federation of Wholesale Distributors said that as profit margins were at best static,
and costs continued to rise, the NMW had significantly eroded the relative rate of pay its
members were able to offer. In industries that operate on low profit margins, such as
wholesale, the relatively high rate of the NMW made it difficult to offer and maintain a
competitive difference to attract good staff.
2.66 On a Commission visit to Northern Ireland, Domestic Care Group told us that nearly all care
provision in Northern Ireland was funded by the public sector, with a growing gap between
costs and the funding available. As a consequence differentials had been squeezed and from
October 2011 its residential care staff would be paid the same as catering and cleaning staff,
at the forthcoming minimum wage (£6.08). In oral evidence, the National Day Nurseries
Association (NDNA) told us that it had been difficult for nurseries to afford to increase pay for
all staff. Feedback from members suggested around half of nurseries were either freezing
pay of non-minimum wage staff or increasing their pay by about half the current inflation rate.
This put a further squeeze on differentials. Also in childcare, White Horse Child Care Ltd said
the NMW had reached levels whereby it had removed trainee posts due to the cost and the
liability under employment legislation. It no longer employed anyone aged 21 or over who did
not have a relevant qualification/high level qualification because of the removal of pay
differentials through NMW increases.
2.67 However, in its oral evidence the TUC said that pay structure impacts had occurred when the
NMW was introduced, but not recently. While unions generally favoured raising wage floors,
which did squeeze differentials, they did not see evidence of adverse impacts on productivity
or recruitment. The Chartered Institute of Personnel Development also said that there had
been less impact from the more recent increases in the NMW. While a number of employers
had reported that previous NMW increases had reduced the scope to reward top performing
employees as increases must be funded out of a fixed pot, the smaller NMW rises of recent
years had made this problem more manageable for some employers.
2.68 The British Chambers of Commerce told us that it was not uncommon that pay rises had
been given in 2011 but that they would not be given in 2012. It said there were also
examples of increased wage drift, as overtime payments and bonuses had been more typical
than increases in regular pay.
2.69 Small retailers also commented on continuing erosion of differentials and how, in many parts
of the sector, the NMW was the going rate for the job. BIRA said the relevance of the NMW
was increasing as the gap between it and the going rates in retail was narrowing. It said the
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