National Minimum Wage, the 'reasons' employers give

[bwglaw]

The 'reasons' employers give for not paying the National Minimum Wage

The excuses used by employers who avoid paying the National Minimum Wage have been laid bare by HM Revenue & Customs which has published a top ten of some of the more unusual or outlandish reasons given to its enforcement teams.

The top ten worst excuses for not paying the minimum wage are:

10. I only took him on as a favour
9. The workers can't speak English
8. He's over 65, so the national minimum wage doesn't apply
7. She's on benefits - if you add those to her pay, it totals the NMW
6. They can't cope on their own and it's more than they would get in their own country
5. He's disabled
4. I didn't think it applied to small employers
3. I didn't think the workers were worth NMW
2. But she only wanted £3 an hour
1. He doesn't deserve it - he's a total waste of space

Paymaster General, Dawn Primarolo, said:

"By far the majority of employers are honest and scrupulous, so instances of non-payment are very much in the minority.

"But this list shows that there are still some rogue employers out there willing to flout the law, which is why our enforcement teams are hard at work across the UK to ensure that everyone is getting paid at least the National Minimum Wage.

"We are publishing this list of excuses to remind employers and employees of their rights and responsibilities in relation to the National Minimum Wage."

HM Revenue & Customs has a network of 16 minimum wage enforcement teams around the UK, which respond to complaints about non-payment, help educate employers and employees and where necessary take enforcement action against those who fail to pay their employees what they are owed. In the last year the enforcement teams have identified nearly £3.3m in underpaid salaries, across the UK.

The minimum wage for workers aged 22 and over is currently set at £5.05 an hour. On 1 October 2006 this will increase to £5.35.

Further advice for employers is available at: http://www.dti.gov.uk/employment/pay/national-minimum-wage/index.html

Source: Workplace Law

[Ender]

Absolutely shocking. They should fine these rogue traders so that they have to manage on an hourly minimum wage for a few months... see how they like it!

[Fluffy]

My 16 year old son works a 40 hour week for £84 take home pay. Since he is an "apprentice" the minimum wage apparantly does not apply. Thats our employment laws for you.

[Cornish Steve]

I didn't know the minimum wage in the UK is quite so high. It's almost double the minimum wage in the US. This must be quite a burden for small business owners.

Not meaning to be controversial, but can someone give a good reason why there should even be a minimum wage? Why disrupt the law of supply and demand?

[MinuWeb]

Minimum wage here is about 80p per hour, Although, being the generous person I am, I pay about 10 - 15% more for my workers that should get minimum + they get a 50p per day coffee allowance (equal to 3 coffees) :D

[lesliedocherty]

Hi

The americans are so anti minimum wage because a great number of ethnic workers are on it and they reckon paying them more will only result in them sending more money home rather than circulating round the economy, i caught a TV debate in texas last year.

For the small business like myself, the minimum wage has been hard, especially with a poor retail climate but i agree 100% with it, there must be a minimum to stop people exploiting the disadvantaged, they need protecting.
I am glad to pay my staff over the minimum wage, they work hard and deserve it.

'pay peanuts and you get monkeys'

leslie

[Cornish Steve]

The americans are so anti minimum wage because a great number of ethnic workers are on it and they reckon paying them more will only result in them sending more money home rather than circulating round the economy, i caught a TV debate in texas last year.
I've not heard this explanation before, but it's possibly a factor. By far the biggest reason, though, is that the US is very friendly to small business. With a minimum wage as high as that in the UK, tens of thousands of family businesses would go under.

For the small business like myself, the minimum wage has been hard, especially with a poor retail climate but i agree 100% with it, there must be a minimum to stop people exploiting the disadvantaged, they need protecting.
Why? If they don't like the wage, find a better employer. If they don't have the skills needed to get a better job, then take some classes during the evening and weekend. Eventually, employers will be forced to pay higher salaries: supply and demand, right?

I am glad to pay my staff over the minimum wage, they work hard and deserve it.
You are exactly the reason why there's no need for a minimum wage. You'd pay the same amount anyway because you know it's needed to attract and keep loyal workers.

'pay peanuts and you get monkeys'
Right. But when the government imposes a minimum wage, you are forced to give those monkeys a slap-up meal. Isn't this unfair on you?

[Ender]

Not meaning to be controversial, but can someone give a good reason why there should even be a minimum wage? Why disrupt the law of supply and demand?

Fair point, but we have a state benefits system that distorts the market.

Many employers were quite happy to see a minimum wage, suprisingly. They wanted to pay a decent rate to reduce turnover etc. but couldn't afford to because the bloke down the road was able to undercut them because their wage bill was lower.

Coming back to your supply and demand argument though. I know we're all facing increasing competition from countries paying workers a few cents an hour, but to compete with those guys we'd have to slash wages, cancel sickness pay, maternity leave etc. and I don't want to live in a society like that.

I'd rather employers paid their workers a decent wage and learnt how to get the best out of them with improved training and investment.

Cheers,
Ender.

[Jayne]

The minimum wage should be banned, it doesn't fit all businesses. Like up here in Yorkshire, a loaf of Bread costs half the price of one down south, but we would still have to pay the minimum wage on half the profits and competition is fierce up here, so you cannot put up your prices.

Our government will not be happy until the shut down all small businesses, it makes my blood boil. They are turning our work forces into lazy, greedy employees. If you set on a staff now on the minimum wage, they would moan at you for being skingy, even though it will be £5.35 soon.

I wish I was PM!

Jayne

[Cornish Steve]

I know we're all facing increasing competition from countries paying workers a few cents an hour, but to compete with those guys we'd have to slash wages, cancel sickness pay, maternity leave etc. and I don't want to live in a society like that.
There is an alternative. Educate our people well and develop their skills. That way, we can pay excellent wages to valuable employees who perform skilled work - while allowing low-cost workers overseas to perform mundane activities that we'd rather not do ourselves.

[Ender]

There is an alternative. Educate our people well and develop their skills. <snip>

Absolutely, that's what I meant by training and investment, viewing people as an important resource rather than as lazy scumbags!

[GameOn Sports]

I didn't know the minimum wage in the UK is quite so high. It's almost double the minimum wage in the US. This must be quite a burden for small business owners.

Not meaning to be controversial, but can someone give a good reason why there should even be a minimum wage? Why disrupt the law of supply and demand?

There are a few reasons why the National Minimum Wage is a good thing.

1) Many employers large, medium and small attempt to completely screw and abuse their workforce. Many employees are terrified of kicking up a fuss in case they lose their job. These people need protection.

2)Money and the economy simply isn't everything. The US-model is APPALLING with many people unable to afford to live let alone receive the necessary basic health care provision. I'd be ashamed to live in a country which treated their citizens in that disrespectful manner.

3)Low wages usually comes with long hours and poverty. From a social point of view, that's a disastrous mix. Poverty results in increased crime and this crime wave affects all of us. All of us should therefore feel it is in the best interests of the nation to have all workers earning a safe and reasonably comfortable living.

4)You gain nothing globally by accepting massively lower wages. Statistics show that businesses are not suffering unduly as a result of this legislation.

5)Using the threat of work shifting overseas is a misleading fear. You cannot compete on cost or wages in this country no matter how low you make wages. Someone will always be cheaper. This is a race to the bottom with people at the rock bottom prepared to work for a bowl of rice a day whilst the company owner swans around in a Mercedes Benz.

Basically it comes down to the fact that people can make money without raping and pillaging everyone in their way (and that includes suppliers and employees). If employers are not big enough to respect their employees and suppliers then perhaps these are business people the country can do without.

[Dawg]

There are a few reasons why the National Minimum Wage might not be a good thing.

It costs jobs. But more importantly there might be more effective ways to fight poverty. This link (http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2006/10/what_do_minimum.html) has lots of links, some of which are academic/life is too short, but it is interesting.

[creospace]

Regardless of whether the NMW is a good or bad thing it is the law. Can I ask those who are apposed to it if they are in favour of employers breaking the law and swindling money from employees and generally being unscrupulous?

[Cornish Steve]

Absolutely not. The reason for wanting to abolish the NMW is to give small business owners more flexibility during difficult times, not to allow established businesses to abuse the system. Nonetheless, the government must accept the moral implications of keeping many thousands of people unemployed.

[Dawg]

Can I ask those who are apposed (sic)to it if they are in favour of employers breaking the law and swindling money from employees and generally being unscrupulous?

Only if it doesn't get in the way of sending malnourished orphans up chimneys or boiling puppies.

-Running Pigdawg of multinationalist capitalism-:D

[easyasit]

here lies the problem, we want and demand ppls skills and loyalty, but in many cases do not want to pay for them.

in truth regardless of what someones skills might be, they have to live.
We chastise ppl for not working and claiming benefits, yet do not pay in many instances the going rate for someone to be able to afford a roof, pay bills, and live

of course there should be a min wage.

Al

[Dawg]

Al, you say:
of course there should be a min wage.

Al

But what if it means there are fewer jobs for the poorest people? If it means there are fewer working hours available to those people?
What if the money it costs would be more effective in fighting poverty if used, for example, on a minimum income, or single rate taxation?
What if overall a minimum wage increases misery rather than allieviating it?

The link (link (http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2006/10/what_do_minimum.html)) I gave above seems to give other links which indicate that a minimum wage is not necessarily the best way for the state to adjust or influence the economy.* Don't those people concerned with poverty, exploitation and social justice have a responsibility to examine all the alternative strategies to combatting poverty rather than just the one one the plate before them?

Just a thought.

* Assuming that state interference is good, effective and necessary. Another debate.:)

[JoyDivision]

People are not going to agree but I do believe in a minimum wage its essential. The way I look at it since the minimum wage more people can afford my services :D

[bwglaw]

I wonder whether since the enactment of the NMW there has been an increase in illegal workers/working which in turn has seen an increase in migrant workers exploited by employers

[Cornish Steve]

You can be sure of it. Whenever the government attempts to thwart the law of supply and demand, somebody somewhere does something, often illegal, to redress the balance. If taxes are too high for cigarettes, there's a black market for them. If taxes on the rich are high, there's a sudden emergence of questionable tax shelters. If there's a high NMW, there's exploitation of migrant workers.

[GameOn Sports]

There is no real evidence to support the theory that a minimum wage set at the current value has any effect on jobs.

Any NMW should also apply to immigrant workers and if it doesn't you can be sure that this will be tightened.

The fact that people always try to get around a law doesn't mean you shouldn't have a law in place.

The NMW brings some social justice to the workplace which helps everybody. At the same time, it is not high enough to cause serious problems for businesses which were not already in dire straits.

Event the Conservative party are in agreement that there should be a NMW. Perhaps they believe it is too high but nevertheless, New Labour have won the argument on this.

[Dawg]

There is no real evidence to support the theory that a minimum wage set at the current value has any effect on jobs.

As per the link (http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2006/10/what_do_minimum.html) I have given (twice):

"The Low Pay Commission itself says the NMW has cost jobs. Appendix 3 of its 2005 report (http://www.lowpay.gov.uk/lowpay/lowpay2005/) surveyed employers in 9 low-wage sectors. 37% said they had cut staffing levels in response to 2003's NMW increase. And this (http://ideas.repec.org/p/cep/cepdps/0544.html) paper found that the NMW had led to job losses in care homes, a sector affected by the NMW."

"What's more, job cuts aren't the only way employers respond to higher wages, at the expense of workers. They also cut hours. That LPC report found that 31% of employers cut basic hours. This paper (http://ideas.repec.org/p/wrk/warwec/746.html)corroborates this finding. "

So there is evidence that NMW set at the current value does affect jobs. As the LPC (Low Pay Commission) states it in their own report, surely this is recognition of that.

I personnally think that there are better ways to alliviate poverty than the NMW, but trying to close down a debate by denying that there is evidence that runs against one's opinions is unhelpful.

[GameOn Sports]

Problem is Dawg that we could swap conflicting stats all day.

You can see the same thing happening with global warming. If you look at global temperatures over 50 years it shows a massive increase. If you look at the same stats over a period of 200 years you see an overall decrease in global temperatures.

Similarily, it would be foolish to say there would be NO cuts at all due to the NMW. The cuts are short term but the overall trend is not a decrease in jobs.

Anyway, it would be impossible to prove that any reduction was purely down to the NMW. You can't just ask the business owner and expect to get to the truth. Having had problems with government legislation in the past I can testify that when your business folds, it's because of more than one thing but it's tempting to blame that new legislation on its own.

Anyway this isn't just about money. THere are serious social consequences of having people work for a pittance and these vastly outweigh the disadvantages of a few jobs being lost in the short term.

You have to consider whether, in principle, a NMW is potentially a good thing in the longer term.
I strongly believe it is but it can be ruined by setting it too high or too low.
If the decision were mine, I'd keep it and probably increase it to £6 per hour.
One could easily argue that if a business model failed at that low level I think it's probably a business model we could live without.
It's strange how it's the same types of businesses which think they can screw their workers. Does that not surprise you?

HP and IBM have to pay their designers £25k to £70k to keep them on board which is a lot more than £5 per hour. Even small technology companies with 3-4 employees have to pay these figures and more.
Why is it that cleaning companies, farms etc can get public sympathy when they have been renowned for having disgraceful working conditions over centuries?

[creospace]

I personally know many people here in latvia who have been exploited by english compnaies, it's jsut a shame they come back with such bad memories.

Generally speaking migrant workers are very hard workers and often working stupid hours so employers get double the bang.

[Dawg]

Game On,

I agree with most of what you say here, but still think that considering other options, a national basic income, a flat rate tax etc might lead to a more cost effective way of people getting more than the bare minimum to live on.

I don't know the exact figures but if someone moves from £15k (just above NMW) to £17k almost 90% is taken in tax. I think this ridiculous rate of marginal taxation applies at incomes based on the NMW too, so that the poorest are in effect taxed the most. This is both wrong and dumb.

So what I am saying is that NMW is not necessarily the best way to help the lowpaid, and if it has negative effects as well, alternatives really should be considered, and the fact that none of the major parties are doing so, is, to use the economic term, pants.

[GameOn Sports]

Game On,

I agree with most of what you say here, but still think that considering other options, a national basic income, a flat rate tax etc might lead to a more cost effective way of people getting more than the bare minimum to live on.

I don't know the exact figures but if someone moves from £15k (just above NMW) to £17k almost 90% is taken in tax. I think this ridiculous rate of marginal taxation applies at incomes based on the NMW too, so that the poorest are in effect taxed the most. This is both wrong and dumb.

So what I am saying is that NMW is not necessarily the best way to help the lowpaid, and if it has negative effects as well, alternatives really should be considered, and the fact that none of the major parties are doing so, is, to use the economic term, pants.

Your figures have lost me. Not sure where you get 90% from.

I would probably support the idea of flat rate tax.
For the lowest paid workers, tax is the least of their worries because chances are they won't be paying any already.

[creospace]

The additional tax is £440, that's not 90%?

Also the UK has very generous tax allowances compared to here in Latvia it's 25% on everything you earn! That only becomes beneficial compared to uk tax when you earn over 55k.

[PlainText]

Cleaners - now there's an interesting one.

Cleaning agencies generally charge around £12 an hour for their services. Yet the cleaner who does all the graft gets - guess what - the minimum wage! Is that fair? That means the agency is making more money than the person putting the work in, just for being the middleman. Granted the agency will have overheads but this is just exploitation of workers.

My own domestic cleaner is self-employed and we pay £8.50 an hour for his services. He gets well above minimum wage and we get a good cleaner and we're happy to be paying him a fair rate for the job.

[Dawg]

Ok, as I said I didn't have exact figs. I did however see an article, (which I can't source now, but was probably from the same source as the link given), about the effects of a rise similar to that I mentioned, for a 2 parent, 2 small child, one earner family, at the approx levels I quoted, given losses from not being able to claim (as much) Family Allowance, (or whatever it is called now), and the extra tax payable; for every £1 increase above (about?) £15kpa, £0.89 was lost, or did not go into the net amount earned. This is an effective tax rate of 89%.
Obviously it would take an accountant with a payroll fetish to check these figs, but for sake of argument they are probably credible.

On another point: we go to quite a few Farmers markets in the SE and the farmers have to pay above minimum wage to get anybody at all. (Or so they say).