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Excessive Minimum Wage Rise Stops Firms Recruiting, warns BCC

Small Business News

9th April 2010

Raising the national minimum wage by almost double last year’s increase will deter small firms from taking on new recruits, the British Chambers of Commerce (BCC) has warned.

A minimum wage increase of 2.2% from 1 October 2010 for low paid workers aged over 21 was announced in this year’s Budget. This will bring their hourly pay up from £5.80 to £5.93. Last year the national minimum wage increased by just seven pence from £5.73 to £5.80.

Low paid workers aged between 18 and 20 will also see a rise, to £4.92 per hour, while 16 to 17 year-olds will be paid £3.64 per hour.

The BCC’s director of policy and external affairs, Dr Adam Marshall, said the wage increase took some of the shine off a Budget that had small firms at its heart.

“It is astounding that the Government would increase the minimum wage by 2.2 per cent at a time when private sector wages are virtually flat and companies across the country are still making tough choices to keep as many people in employment as possible.”

“A near-doubling on last year’s increase is even more astounding,” added Marshall. “Combined with next year’s rise in National Insurance contributions, a minimum wage that’s a ‘one-way bet’ could stop some businesses taking on new workers.”

The Federation of Small Businesses’ employment law committee chairman, Ben Burgher, agreed that the wage rise would put pressure on small employers.

“For the worker, this increase in the NMW will mean an extra £1.54 a week after tax. But for an employer, the impact of the increase could add thousands to their wage bill.”

However, the Confederation of British Industry’s (CBI) deputy director-general, John Cridland, said the increase was reasonable

“This moderate increase recognises that many businesses are struggling and helps protect jobs at a time of rising unemployment.”

“The inflation-busting rise some unions had called for would have hit firms hard and put many lower paid workers on the dole.”

Business minister, Pat McFadden, said that the Government announced the increase following recommendations from the Low Pay Commission (LPC).

“The LPC, which includes employers and Trade Union representatives, carefully considered the latest economic data and evidence before making its recommendations, balancing the needs of businesses and workers,” he said.

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