Formula for success?

Manufacturers have reiterated their call for a formula to be used for setting increases in the National Minimum Wage (NMW), as evidence shows that recent increases are beginning to bite.

Britain’s manufacturers have reiterated their call for a formula to be used for setting future increases in the National Minimum Wage (NMW), as evidence begins to mount that recent increases in the NMW are now beginning to bite.

EEF, the manufacturers’ organisation, argues in evidence submitted to the Low Pay Commission that recent increases in the NMW, which have been well above the rate of inflation and pay settlement levels, are starting to have an impact on manufacturers’ pay levels and their remuneration structures through the need to maintain pay differentials.

Consequently, EEF has repeated its previous calls for a formula to be used to determine future increases in the NMW. According to the EEF, this would provide employers with the benefit of greater certainty about future increases, enable them to plan and budget for any cost increases more easily and help them to reduce the adverse impact that these increases will have upon their competitive position.

EEF argues that future increases in the NMW should be based on a retrospective analysis of the movement of basic rates of pay across the economy.

Whilst it is recognised that this information may not currently be readily available from official statistical sources, EEF considers that the average level of pay settlements that has been reached across the economy over the previous 12 months would be a good approximation for this.

EEF has also warned that the TUC’s recommendation to increase the NMW to £6 per hour over the next two years will inevitably have an adverse impact on the costs of many manufacturers and therefore threaten international competitiveness and employment.

“Whilst to date manufacturing companies have generally been able to live with the National Minimum Wage, recent increases are clearly now beginning to bite,” commented EEF Deputy Director of Employment Policy, DavidYeandle. “With pressure mounting for further significant increases, what manufacturers now want above all else is certainty about the impact that future increases will have on their business so that they can plan accordingly.”

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