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The National Minimum Wage

Tania Goodman, Partner and head of Employment at Collyer Bristow, looks into what housebuilders need to know about the National Minimum Wage.

First published in Professional Housebuilder and Property Developer magazine (09 May 2019).

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The National Minimum Wage (NMW) is the minimum pay per hour that most workers under the age of 25 are entitled to by law. The National Living Wage (NLW) is the legally binding hourly rate for workers aged 25 and over.

April marked the twentieth anniversary of the NMW coming into force in the UK. When it was first introduced it was not without controversy and seen by some as forcing low paid workers out of employment. This has not proved to be the case and the NMW has raised the threshold of the lowest paid without any direct evidence to suggest it has damaged employment prospects.

However, according to a Redrow Homes’ report published in 2018, low starting wages are still the biggest barrier to becoming an apprentice in the industry, with nearly half of youngsters across the South West of England saying raising the rates would attract more young people. A total of 49 per cent of 74 young adults aged between 15 and 21 said increasing starting wages would encourage more to take up an apprenticeship. Further work is needed to support apprentices and their development.

Here are the latest figures for the NMW and NLW that apply from April 2019:

25 and over NLW      £8.21

21 to 24 NMW           £7.70

18 to 20 NMW          £6.15

Under 18  NMW      £4.35

Apprentice NMW   £3.90

Apprentice rate
Apprentices are entitled to the apprentice rate if they are aged 19 or under or over 19 and in their first year of apprenticeship. So, an apprentice aged 22 in their first year of apprenticeship is entitled to a minimum hourly rate of £3.90.

Living wage
There is also a separate concept of the ‘Living Wage’, which is the level of pay recommended by The Living Wage Foundation, an independent campaign group. This is based on the perceived cost of achieving an adequate standard of living and is not legally enforceable, but rather a suggested amount that employers can chose to pay and is higher than the NMW and the NLW.

The current recommendation for a UK Living Wage outside London is £9 per hour for all workers aged 18 and over and for those living inside the capital it’s £10.55. Some 4,000 organisations have signed up as accredited Living Wage employers, ranging from FTSE 100 companies to some local authorities and small businesses and charities.

The Chancellor’s announcement at the Budget in October 2018 of a 38p per hour increase for workers aged 25 and over from April 2019 is a 4.9% increase above the level on inflation.

Bryan Sanderson, Chair of the Low Pay Commission, believes that the NMW is moving into another phase, with the ultimate aim to end low pay once and for all. Of course, this remains to be seen, but at least the Government seems committed to increasing the NMW and NLW annually and says its aim by 2020 is for the NMW to be 60% of median earning.

With regard to the construction industry, this may not be enough, especially in London where it has been reported that its struggling to attract and retain the workers it needs. This is creating a huge problem with skills shortages and is driving up the high cost of building in the capital and possibly contributing to poor quality of workmanship in the sector.

Of course, there is also the prospect of losing EU workers through Brexit, although that may not have happened by the time this article is published!

First published in Professional Housebuilder and Property Developer magazine (09 May 2019).

 

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