BUILDING ON THE NATIONAL MINIMUM WAGE BY BOB SIMPSON
Bob Simpson is a Reader in Law at the London School of Economics, specialising in labour law. He is the author of earlier publications by the Institute of Employment Rights on Trade Union Recognition and (with Jane Elgar) Industrial Action Ballots and the Law. This publication, like all publications of the Institute, represents not the collective views of the Institute but only the views of the authors. The responsibility of the Institute is limited to approving its publication as worthy of consideration within the labour movement.
ISBN 1 873271 87 5 April 2001 published by the Institute of Employment Rights 177 Abbeville Road London SW4 9RL 020 7498 6919 e-mail ier@gn.apc.org www.ier.org.uk printed by Upstream (TU) 020 7207 1560 ÂŁ6.50 for trade unions and students ÂŁ20 others THE
INSTITUTE OF
EMPLOYMENT RIGHTS
building on the national minimum wage
executive summary
by Bob Simpson
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contents
executive summary
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CHAPTER ONE
introduction
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CHAPTER TWO
pay and the law: past and present amount of pay deductions from pay method of payment
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building on the national minimum wage
CHAPTER THREE
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early experience of the national minimum wage
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coverage defining ‘wage’ and the working time for which the national minimum wage has to be paid pay reference period ‘wage’ working time enforcement workers’ rights the Inland Revenue’s powers
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CHAPTER FOUR
a broader perspective a new ‘fair wages’ policy sectoral regulation of pay the NMW and equal pay strengthening the protection of pay
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endnotes
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recent Institute publications
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ABBREVIATIONS
Advisory, Conciliation and Arbitration Service CAC Central Arbitration Committee DTI Department of Trade and Industry EC European Community ECJ European Court of Justice EPA Equal Pay Act ERA 1996 Employment Rights Act 1996 ET Employment Tribunal LPC Low Pay Commission NACABx National Association of Citizen Advice Bureaux NMWA National Minimum Wage Act PRP Pay Reference Period TULCRA Trade Union and Labour Relations (Consolidation) Act 1992
contents
ACAS
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building on the national minimum wage
executive summary
I There is now a fair body of experience of how the national minimum wage is working in practice. It is a good time to put that experience in context and look at the role of the law in relation to pay in general. I Pay is a worker’s legal right under the terms of employment contract. There are now statutory rights to pay for certain times when the worker is not at work: days off sick, holidays and some periods of time off. The law has also regulated the amount of pay in various ways at different times, notably for low paid workers covered by Wages Councils and under a sequence of ‘fair wages’ provisions which came to an end in the 1980s. The Equal Pay Act 1970 remains an important feature of the law on pay. Regulation of deductions from pay for some workers under the Truck Acts was replaced in 1986 by the more limited regulation now in the Employment Rights Act 1996 which covers a much larger part of the workforce. In 1986 the right of manual workers to be paid in cash was also repealed.
I While the provisions on the definition of the ‘pay reference period’ for NMW purposes have generally worked well, the definition of ‘wage’ has led some employers to consolidate otherwise excluded premium payments into the basic rate in order for them to count
executive summary
I Early experience of the national minimum wage (NMW) has given rise to concerns over the exclusion of workers under 18 and the lower rate for workers under 22 and all workers in the first six months of employment that provide for certain accredited training. Take up of the training rate has been low and the lower rate for young workers is inconsistent with the trend for payment systems to eliminate age-related pay rates.
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towards the NMW. One issue for the future may, therefore, be consideration of a national minimum overtime rate. The complex provisions on the ‘working time’ for which the NMW must be paid have also generally worked well, but there is evidence of some abuse of ‘fair estimate agreements’ for homeworkers. The interaction of the law on the NMW, working time, including holidays and pay during periods of absence from work more generally is an issue which may need further consideration. I The rights and procedures for enforcing the NMW need further consideration with a view in particular to providing more effective procedures for protecting workers against victimisation where they take steps to enforce their NMW rights. The failure to implement the provision in the NMW Act providing for workers to receive a NMW statement is a further weakness in the law. While the Revenue have made a good start in their role as the main enforcers, there is a need for new initiatives adapted to the needs of particular communities in which non-compliance with the NMW is prevalent.
building on the national minimum wage
I Apart from a real increase in the NMW rate, other pay-related initiatives worth further consideration include a new ‘fair wages’ policy, the case for special sectoral regulation in areas other than agriculture and the revival of independent scrutiny of pay structures comparable to that which the Central Arbitration Committee (CAC) attempted to exercise under now repealed provisions of the Equal Pay Act. The time may also be right for a review of the adequacy of the legal protection of workers in relation to deductions from pay. Now that the NMW has bedded down as an integral part of the law, it may be worth thinking about the overall role of the law in relation to pay to see what, if any, beneficial changes might be made.
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Unison delegates voting for an increase in the minimum wage at TUC Congress 2000
pic: John Harris (reportdigital.co.uk)
WHAT IS THE INSTITUTE? The Institute of Employment Rights was launched on 28th February 1989. As a labour law “think tank”, supported by the trade union movement its purpose is to provide research, ideas and detailed argument. In 1994 the Institute was granted charitable status. The Institute has attracted wide and distinguished support. Among the membership are John Hendy QC, Professor Keith Ewing, Lord McCarthy and the general secretaries of Britain’s largest trade unions. The results of the work of the Institute are published in papers and booklets. It also provides short articles, free of legal jargon, for trade union journals and other publications. The Institute provides tools of analysis and debate for the trade union movement in the area of labour law. We are not a campaigning organisation. The Institute does not assume that legal measures can offer ultimate solutions for political, economic and social problems. However, it recognises that law has a part to play in influencing the employment relationship, both individually and collectively. Funding is from various sources, including subscriptions which entitle subscribers to a copy of all our new publications. If you are interested in subscribing or would like to know more about the Institute, then contact us at 177 Abbeville Road, London SW4 9RL, 020 7498 6919.
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