Flexible New Deal | New Deal Scandal: Leading Welfare Reform Concerns

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The National Minimum Wage (NMW) has celebrated 10 years this year. 1.5 million people are cheated out of receiving the National Minimum Wage. New Deal Scandal asks “Has the National Minimum Wage solved anything?”

National Minimum Wage: Concept

The National Minimum Wage (NMW) is designed to prevent employers taking advantage of workers by paying them unfair low wages leading them and their families in to poverty.

The National Minimum Wage was to set a benchmark by age of what the minimum hourly worth of a worker is. No employer would be able to employ any person for below this rate and thus people would be above the poverty line.

National Minimum Wage: Criticism

Rather than being a properly enforced law, the low enforcement properties and powers by Government Agencies meant the National Minimum Wage soon became a mere guideline. No wonder how around 5% of the entire UK workforce receives such a low wage.

Most employees receiving under the National Minimum Wage would not report their employer due to having an extremely low paid job pays more than unemployed benefits.

There are a lot of exempt people from the law who are not entitled in receiving NMW.

Employers are subject to relatively pathetic penalties should the HMRC decide to pursue the case.

National Minimum Wage: Enforcement

Her Majesty’s Revenue & Customs (HMRC) enforces the NMW.

How desirable paying your employees below National Minimum Wage is to employers

Step 1: The employer receives a “Notice of Underpayment“. This means paying the arrears to the named workers at the current NMW. There is also a fine of half the underpayment (minimum of £100, maximum £5,000).

Step 2: Pay within 14 days and the fine is halfed to £50 (minimum) or £2,500 (maximum)

Step 3: Refuse to pay and comply with the above notice (which is a Criminal offence) the HMRC either takes you to a tribunal or County Court on behalf of the worker  or to a Magistrates Court and prosecutes the employer to level 5 (up to £5,000).

National Minimum Wage: Exemptions

The following people do not need to be paid NMW:

• There is no NMW for those under “compulsory school age” (16)
  There is nothing stopping (for example) a newsagent paying a 13 year old £5 per week to deliver newspapers for 2 hours early in the morning and 2 hours at night for every day of the week.
• Apprentices
  Apprentices under 19 are not entitled to NMW. Apprentices over 19 are not entitled to NMW in their first year.
• Work experience, Volunteers, Internships
  These people are not entitled to NMW unless are classified as a “worker” (such as having an contract)
• Company Directors
  Unless they have an employment contract with the company. (Company Directors are officers under Common Law)

National Minimum Wage: Rates

16-17:   £3.53
18-21:    £4.77 (“development rate”)
22+:       £5.73

National Minimum Wage: Reality

In reality, all the National Minimum Wage has done is become a benchmark for employers suggesting what wage they should pay employees in lower skill jobs. This has kept earnings down (rather than the intention of keeping them up to a respectable rate).

Reviewing the NMW 10 years on, it is clear that without it we would probably be paid more rather than less.  Employers need someone who can do a good job, the money offered reflects this and employers only compete with others in what wages they offer: the NMW is a good excuse to keep them rock bottom as possible.