Minimum wage to rise by 2.2 per cent

The government has announced that the national minimum wage is to rise by 2.2 per cent.

As from 1 October 2010, the hourly adult rate will increase from £5.80 to £5.93.

The news was revealed in documents published following the Budget.

John Cridland, the deputy director general of the CBI, said: "This moderate increase recognises that many businesses are struggling, and helps protect jobs at a time of rising unemployment. The inflation-busting rise some unions had called for would have hit firms hard and put many lower paid workers on the dole."

Other business groups, however, were not as welcoming.

Adam Marshall, director of policy and external affairs at the British Chambers of Commerce (BCC), said: "The national minimum wage increase took some of the shine off a Budget that had small and medium-sized businesses at its heart.

"It is astounding that the government would increase the minimum wage by 2.2 per cent at a time when private sector wages are virtually flat, and companies across the country are still making tough choices to keep as many people in employment as possible."

The British Retail Consortium (BRC) described the increase as "irresponsible".

Stephen Robertson, the BRC's director general, said: "A measure of this magnitude should have been in the Budget speech. It's at odds with government promises of prudence and public sector freezes and will damage retailers' ability to maintain and create jobs. How can an increase virtually double last year's be justified? Economic conditions were far weaker in the run up to this year's decision than twelve months earlier."

Once the economy returns to stability, the BRC wants the Low Pay Commission (LPC), which recommends the minimum wage rate to the government, to establish a more predictable relationship between the rate and average earnings movements.

This would mean that the LPC would provide a longer-term outlook for the minimum wage, offering businesses greater certainty about the direction of future costs, the BRC said.

The new rates, which will come into force on 1 October 2010 will be: £5.93 per hour for workers aged 21 and over (a 2.2 per cent increase on the current £5.80 rate); £4.92 per hour for 18-20 year olds (a 1.9 per cent increase on the current £4.83 rate); and £3.64 per hour for 16-17 year olds (a 2 per cent increase on the current £3.57 rate).

The accommodation offset will rise from £4.51 per day to £4.61.

The government also announced that it had accepted the LPC’s recommendation to introduce an apprentice minimum wage of £2.50 per hour.  

The new rate will apply to those apprentices who are under 19 or those that are aged 19 and over but in the first year of their apprenticeship.

Business Minister, Pat McFadden said: “The Low Pay Commission, which includes employers and trade union representatives, carefully considered the latest economic data and evidence before making its recommendations, balancing the needs of businesses and workers.

“The recommendations provide a welcome increase for workers, but the economy is still fragile and government must continue to support the recovery in the months ahead.

“I’m also glad to see the LPC recognising the significant contribution that apprentices make to the economy. I hope this will encourage more people to take advantage of this opportunity and invest in their skills by taking up an apprenticeship."