As most readers are no doubt aware national minimum wage rates were subject to their usual increase on 1 October. The main rate has increased from £6.08 to £6.19.
The rates for workers aged 16-17(£3.68) and 18-20 (£4.98) are unchanged this year.
The apprentice rate has increased from £2.60 to £2.65 and the accommodation offset (which employers providing accommodation can set off against the minimum wage) has increased from £4.73 to £4.82 per day.
The TUC has pointed out that those on the minimum wage (who are mainly women) will experience a net drop in spending power in real terms, taking into account that the rise in the main rate is 1.8% whereas RPI inflation is currently 2.9%. General Secretary Brendan Barber commented:
While we are pleased that Government has rejected the siren calls of some employers to freeze the minimum wage for adult workers and apprentices, these increases are still far below inflation and will leave the lowest-paid facing a real terms cut.
These new rates are a particular blow to younger people who will face the biggest hit on their living standards. There is no evidence that the minimum wage has had an adverse impact on young people’s employment so it is hard to see the logic behind their pay freeze.
[These] increases do not do enough to help hard-pressed families. We need a bolder increase next year otherwise the real incomes of minimum wage workers will continue to fall, along with consumer demand.
Also on 1 October auto-enrolment came into force for the biggest employers – those employing 120,000 or more employees, who must have in place a scheme enrolling employees aged 22 or older and earning over the tax threshold into a pension scheme. Minimum contributions start at 1% of eligible earnings from each of employer and employee, rising to a total of 8% by 2018. By September 2016 , the scheme will apply to all employers including new businesses. and those with fewer than 50 employees. Employers without a suitable pension scheme in place can make use of NEST, a simple low cost government sponsored scheme run by a not for profit trust. Employees who want to opt out will have to take active steps to do so. Time will tell whether this will have the positive effect of kick-starting a culture of saving for retirement or whether it will lead to complacency and leave workers without adequate provision in a future where state provision may be very different.
This month has also seen the passing (on 5 October) of the last possible date for compulsory retirement relying on the default retirement age of 65. Both employer and employee would have had to exhaust all available procedures to the maximum extent possible for the process to have taken this long (given that the last possible date for notifying an employee of compulsory retirement based on the default age was 5 April 2011.
However, as I pointed out in this article last month there may yet be mileage for employers in seeking to impose compulsory retirement based on a specific age, even though the default age is no longer available.