The national minimum wage debate | AccountingWEB

The national minimum wage debate

Two weeks ago, the government pushed the national minimum wage (NMW) up by 11p to £6.19. We asked AccountingWEB members for their views on how this affected their business, clients and the economy.

As part of the employment reforms rolled out from 1 October, the raising of the minimum wage seemed to rile many on AccountingWEB.


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davidwinch's picture

Holiday pay

davidwinch | | Permalink

Almost 5 years ago, in November 2007, a Ms Williams took British Airways to an employment tribunal claiming that her holiday pay should not be calculated based just on her basic pay rate (which apparently amounted to approximately £96,000 per annum) but also should reflect supplements ordinarily payable to her whilst working, which are described as "flying pay supplement" and "time away from base allowance".

Obviously when she is on holiday Ms Williams is neither flying nor is she away from base.  A simple minded accountant like myself might have thought that was the end of the matter.  But no!

This week the UK Supreme Court is expected to deliver a final ruling on how the holiday pay of Ms Williams (and by implication many thousands of other employees) should be calculated.

Can't wait!


davidwinch's picture

Err, back to square one?

davidwinch | | Permalink

The UK Supreme Court has decided that it does not have the material before it to finally determine the amount which should be paid as holiday pay.  So it has sent the matter back to the Employment Tribunal for reconsideration by them.

So we are, in a sense, back where we started in November 2007!

However the Employment Tribunal will be guided by the Supreme Court's determination of the relevant criteria.  In effect the employer has to calculate holiday pay based on basic pay plus flying pay supplement plus the proportion of time away from base allowance which was intended to go beyond reimbursement of employees' additional costs.

The point is that holiday pay is related to total pay when working - not just basic pay.

That could have implications for the holiday pay calculations of many other employees - such as those who receive commission on top of basic pay.


Mimimum wage

peterdragonetti | | Permalink

One resutl of a low mimimum wage is that people on it claim housing benefit and will, no doubt, in due course, the new universal credit. So when companies like Tesco and other big retailers, or other large employers pay the mimimum wage which is inadequate, the rest of us subsidise these low wages. Increase the minimum wage, and you will reduce government spending. Vice versa, eliminate housing benefit and employers would, perhaps, be obliged to pay workers a market rate that reflects local costs.


Knight Rider | | Permalink


Perhaps if housing benefit was renamed 'Guaranteed rental income relief for landlords' it would be abolished.

The minimum wage solves nothing; once introduced the arguments continue over the wage level,age ranges etc etc

In a free society the state should not interfere in agreements entered into between individuals.


should_be_working's picture

Sticking plaster

should_be_working | | Permalink

If there is a difference between the basic cost of living and the (market) minimum wage, then as peterdragonetti has pointed out, it really is a matter of either the employer being forced to pay more, or the taxpayer making up the difference in benefits, both of which are just sticking plasters.

If people are working for less than a real minimum (or would be without an enforced 'living minimum wage') then we need to ask what is happening with the labour market. Normally if suppliers (workers) cannot operate at the price the market is demanding, then some drop out of that market until equilibrium is achieved. The problem here (apart from the negative social aspects of workers dropping out of the jobs market) is that they are being subsidised to stay in, and customers (employers) are being forced to pay unrealistically higher prices via the NMW. Add in then the effects of Employers' NI - in the first instance another artificial inflation of labour prices, but ultimately another tax on the employees, reducing take-home pay and thus putting more upward pressure on working benefits and the NMW.

Take it further and then we look at the artificial upward pressures on the cost of living - tax again, the costs of regulation, and so on ... and the lack of the downward pressure on those living costs as a result of keeping wages artificially high.

Yes, I have a theme developing here and I suspect I'm on a similar wavelength to Knight Rider.

It would be interesting to compare the costs of working benefits to the amounts raised by employers' NI, or how many % points in VAT ...

excelaccountz's picture

minimum wage

excelaccountz | | Permalink

A qualified accountancy job pays on an average £12 per hour amounting to approx £22k per annum & for that they need to get trained & pass all the exams, which are not easy.  What I am trying to say is that some expertise is required to earn that income.  

With minimum wage of £6.19, people with no expertise earn half of what people with intelligence & expertise earn.  If it were to be £10 per hour , then there is no incentive for people to study & hence businesses will be burdened with minimum wage with less skilled people, which is a bane for the economy.

Srinivas Ram

Excel accountants, leeds


should_be_working's picture


should_be_working | | Permalink

A good point Srinivas, though what may happen is that pay differentials will re-establish themselves and so all pay scales will ratchet upwards. Hardly a recipe for UK competitiveness.


excelaccountz's picture

is it a tactic to raise more tax?

excelaccountz | | Permalink

Hi Expertise

The government does nothing about increasing fuel costs, in spite of the duty being more than 100%. Why?  Because, the more the fuel price goes up, the more the revenue from VAT !

Is minimum wage increase a tactic to raise more tax & insurance?

Britain survives on SME businesses & they should protect it.


Excel accountants, Horsforth, Leeds





No great understanding but

Roland195 | | Permalink

The National Minimum Wage confuses me as the minimum depends on the recipient's age which are set at seemingly arbitrary levels. Why it should be legal to pay an 18 year old less than a 22 year old based on nothing other than their ages?

We would be outraged if this were based on gender, race, height etc so why is this discrimination allowed/encouraged?






Exactly Roland.

Knight Rider | | Permalink

Exactly Roland.

State intervention distorts the market,creating more problems and solves nothing.

Auto enrolment is another problem in the making.