National Minimum Wage Regulations 1999 (Amendment) Regulations 2009

The 2009 national minimum wage regulations make three changes. First, they increase the hourly rates of the national minimum wage and the maximum amount for accommodation that is allowed to count towards pay for national minimum wage purposes. Secondly, they stop tips, service charges, gratuities and cover services paid to a worker through the employer’s payroll from being used to make up pay for national minimum wage purposes. Thirdly, they rectify an anomaly by ensuring that the Erasmus and Comenius programmes under the European Union’s lifelong learning umbrella are exempted from the national minimum wage. First, I shall deal with the increases in the national minimum wage rates and the accommodation offset that are contained in Regulations 2, 4 and 6. As noble Lords will be aware, we are currently celebrating the 10-year anniversary of the national minimum wage. Despite the controversy when it was introduced, and a few dire predictions, it has become an accepted and vital feature of the British employment landscape. It continues to provide a floor below which wages cannot fall and therefore gives a certain level of protection for all vulnerable individuals. To ensure that national minimum wage rates properly take account of economic circumstances, they are reviewed annually by the Low Pay Commission, an independent body made up of employers, trade unions and academics. The aim of the commission is to have a minimum wage that helps as many low-paid workers as possible without any significant adverse impact on inflation or employment. This year, in the wake of the worst financial crisis since the 1930s, the commission has been doubly concerned to make sure that it gets its recommendations right. The Government therefore considered it right that the commission should be allowed to delay its report for several months. The delay gave the commission time to access additional data, including a further inflation report from the Bank of England, jobs figures for December 2008, gross domestic product data for the fourth quarter of 2008 and average earnings information up to January 2009. In addition, the commission was able to conduct further analysis of the current recession and seek more views from stakeholders. The commission’s recommendations were published in May. It suggested that the adult rate, for workers aged 22 years and over, should increase by a modest 1.2 per cent. It also recommended that the other rates—that is, the rates for 18 to 21 year-olds, for 16 to 17 year-olds and the maximum amount for accommodation that is allowed to count towards pay for national minimum wage purposes—should also increase between 1.1 per cent and 1.3 per cent. We agree with the commission’s recommendations. They strike the right balance and ensure that low-paid workers are treated fairly. We estimate that nearly 1 million people stand to benefit from these increases. The second change that the regulations will make, on the treatment of tips, also has at its heart issues of fairness. Since the national minimum wage came into being in 1999, it has been legal for an employer to use tips, service charges, gratuities and cover charges to count towards payment of the minimum wage where they are paid to a worker through the employer’s payroll. We have reviewed this position and have come to the conclusion that it is not right. The time is now right to ensure equity for all workers and create a level playing field in wages among employers, so that tips can no longer be used towards payment of the national minimum wage. This change will also benefit consumers, because when people leave a tip, in a restaurant or elsewhere, they expect it to go to the staff. Consumers have a right to know what actually happens to the tips that they leave in good faith. Regulation 5 therefore makes it clear that service charges, tips, gratuities or cover charges paid through the employer’s payroll will not count towards payment of the national minimum wage. The third change that the regulations make is about ensuring consistent application of national minimum wage rules. It concerns the European Union’s lifelong learning initiative, which supports member states’ policies on employability, lifelong learning and social exclusion, and gives students the chance to gain work experience in other countries. Work placements under one of the programmes under the lifelong learning umbrella, a scheme called Leonardo da Vinci, were specifically exempted from the national minimum wage in 2007. However, work placements carried out in the same way under two other programmes, Comenius and Erasmus, are not subject to the same exemption. Regulation 3 will ensure that work placements under both the Comenius and Erasmus programmes are exempt from the national minimum wage. We estimate that around 1,700 students a year are undertaking work placements under those programmes. We should not stand by and let vulnerable or low-paid workers suffer particularly during this recession. At the same time, we have a duty to make sure that our regulations do not push struggling businesses over the edge. The measures contained in these regulations strike the right balance. For these reasons, I commend this instrument to the Committee. I beg to move.