The increase in the national minimum wage is unwelcome in today's economic climate. We understand the Government must strike a balance between boosting consumer spending and economic growth, however they must ensure the UK's small businesses stay competitive at a time when the economy remains fragile.
There will be businesses that operate on thin margins, who will struggle with any increase to the minimum wage. We therefore urge Government to place renewed impetus into driving down their overheads, such as business rates, energy and fuel costs, and freeing up cash-flow by ending the scourge of late payment by big companies to their suppliers.
The Business Secretary, Vince Cable, said he was in favour of companies paying more than the minimum wage if they could afford it. But if wages are too high, it could lead to "significant loss of employment".
The new rates for minimum wage compare to the so-called Living Wage of £7.45 (outside London) and £8.55 in the capital. The Living Wage is worked out according to the basic cost of living in the UK, but employers only pay it on a voluntary basis.
The Living Wage Foundation welcomes the work of the Low Pay Commission, which has a difficult task in setting a rate. It is very important to have a statutory floor and ensure nobody sinks below that level.
But we think it's also important to have something more ambitious than a minimum - which is where the Living Wage comes in. The Living Wage is a voluntary rate of pay which employers commit to paying.
It's for employers who decide they can do better and go further than the statutory minimum.
– Rhys Moore, Ddirector of the Living Wage Foundation
Unite General Secretary Len McCluskey says the 12p rise in the minimum wage for adults is not enough, and wants it to go up by £1-an-hour.
An increase of £1-an-hour would have the twin-pronged effect of putting money into the wallets and purses of the lowest paid in the UK. They would then have a small extra incentive to spend in the countrys high streets, already on its knees because of the flatlining economy.
Such a £1 uplift is a more sensible way to help people off benefits - and much more humane than what the government is currently doing with its savage welfare cuts. In the long-term, increasing the national minimum wage could save the country billions. The 12p increase announced is derisory - and does nothing to help those already struggling with soaring household bills.
Tim Thomas of the manufacturers' organisation the EEF said the announcement struck a balance between the need for pay progression and the limitations employers face accommodating pay rises.
Tim Thomas said:
"The modest increase in the apprenticeship rate is unlikely to negatively affect apprenticeship recruitment and of much greater importance is the raising of apprenticeships standards, better information to students and ensuring that apprenticeships are truly employer-led and employer-driven."
Ministers say they have rejected a recommendation from the Low Pay Commission that the rate for apprentices should be frozen. Business Secretary Vince Cable said:
We are accepting its recommendations for the adult and youth rate increases... However, there is worrying evidence that a significant number of employers are not paying apprentices the relevant minimum wage rate.
Apprenticeships are at the heart of our goal to support a stronger economy, and so it is important to continue to make them attractive to young people.
Boosting the incomes of the low paid goes straight into the economy and wage-led growth must be part of the recovery so we would have liked to have seen minimum wage rates go up further today, even if the government has rightly rejected calls for a freeze.
We will continue to press ministers to ensure the minimum wage is properly enforced particularly for apprentices where there is considerable evidence that many miss out.
And we will continue to urge the many employers who can afford it to implement a full living wage for their staff.