National Minimum Wage Rise a "Barrier to Recruitment"

Small Business News

15^th April 2011

The Government’s decision to increase the national minimum wage (NMW) in October will deter small firms from taking on low-paid workers, business groups have warned.

From 1 October 2011, the adult rate will increase by 15 pence to £6.08 an hour, for 18-20 year-olds by 6 pence to £4.98 and the rate for 16-17 year-olds will rise by 4 pence to £3.68 an hour.

British Chambers of Commerce director general, David Frost, said that this is “the wrong increase, at the wrong time.”

“Our recommendation has been to maintain the current NMW rates to allow businesses to take on staff. It’s clear from speaking to business owners that a significant number are being forced by the economic conditions to freeze wages in 2011. These changes will be a barrier to job creation, particularly for small businesses and ultimately economic recovery.”

Forum of Private Business spokesman, Phil McCabe, said that the NMW increase could backfire as the people it aimed to help could find it harder to get jobs.

“The NMW is there to be a benefit to employees and yet the steep year-on-year increases could potentially be a detriment to job creation. The Government is relying on small firms to provide jobs and yet they are making it difficult. Having such steep wage rises discourages businesses from taking on staff at a certain level.”

“We agree with the principle of a minimum wage as employees need to be able to earn a living wage, but it has gone up by 60 per cent in ten years and is an ever-rising cost for small firms.”

Small-business owner Steve Wilson, licensee of the King’s Head pub in Wells, Somerset, said that the Government’s decision would put pressure on employers to raise all their staff’s wages.

“It sends out the wrong signal, because if the Government increases the minimum wage, everyone quite rightly thinks it is suggesting we should all be paid more because of inflation. So at a time when everyone is convinced that austerity is the way to go, the Government is making everyone expect a pay rise. They might as well do a marketing campaign telling people to ask for increases.”

For further business advice read the article on the National Minimum Wage.