Basic wage to hit £5 an hour next year

Companies are bracing themselves for the introduction of a £5-an-hour minimum wage next year as independent research shows that many firms are already paying well above the current legal floor.

The war of words between business and unions over the national minimum wage will intensify today with publication of Income Data Services' latest findings, which show that basic pay rates at many companies have already leapfrogged the national minimum wage to hit £5 an hour.

The Government's legal pay floor goes up by almost 8 per cent to £4.85 from £4.50 an hour on Friday, but employers are increasingly looking ahead to next year's rise. Incomes Data Services (IDS), an independent think-tank, said a highly competitive labour market had forced businesses to offer wages above the national minimum level. "Many firms have already moved their lowest rates to £5 an hour," Alastair Hatchett, at IDS, said. "So there is clearly room for the minimum wage to rise to at least this level in 2005."

The report said there was little evidence that an average 7 per cent rise in the wage since 1997 had hurt employment, pointing to the 110,000 new jobs in retail and hospitality in the year to March.

The trade unions leapt on the report, saying it supported their calls for another large rise next year but business leaders said many firms were already worried about the rise to £4.85.

Brendan Barber, the general secretary of the TUC, said there was room for the wage to go above £5 next year, as employment had grown in sectors of the economy where the minimum wage had had the most impact.

"The minimum wage is doing the business," he said. "It helps about a million people every time it goes up, most of them part-time women workers, and jobs have been gained not lost."

The CBI, Britain's largest employers group, accused the TUC and the IDS of "jumping the gun" by assuming businesses could cope with a £5 rate. "The fact is that more and more companies are starting to say that the wage is having an impact. It's on their radar," Susan Anderson, its director of human resources policy, said. "We already know many firms are worried about the next rise to £4.85. We cannot afford to go on for ever giving people increases well above rises in average earnings."

But Mr Barber accused the CBI of "crying wolf" every time the minimum level was increased. "It's time they accepted that the wage works and instead concentrated on helping the Government and trade unions crack down on employers who are not paying staff the legal minimum," he said.

IDS said major employers had established what it called a "mezzanine" pay floor of between £5 and £5.20 on top of the £4.50 legal minimum. It said the starter rate for a checkout assistant at Tesco was currently £5.10 rising to £6.55 after 12 months. The minimum rate for a customer adviser at Marks & Spencer is £4.95 and the established rate £5.30.

One employer told IDS it had set its own minimum level well above the statutory floor to avoid having to return to the issue, while others had moved their annual pay review dates to fit in with the October review.

The TUC pointed to figures from the Office of National Statistics which show that since the minimum wage was introduced in 1999 at £3.60, the number of employees in the country has risen every year since, despite four consecutive minimum hourly rate increases.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Content Writer - Global Financial Services

£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Web Developer - PHP

£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Field Sales Consultant - Financial Services - OTE £65,000

£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Loan Underwriter

£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...

Day In a Page

The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

The Silk Roads that trace civilisation

Long before the West rose to power, Asian pathways were connecting peoples and places
House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

The honours that shame Britain

Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
When it comes to street harassment, we need to talk about race

'When it comes to street harassment, we need to talk about race'

Why are black men living the stereotypes and why are we letting them get away with it?
International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

International Tap Festival comes to the UK

Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

'A subversive brothel keeper and Communist'

Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

BBC heads to the Californian coast

The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

Victorian fraudster who shook the Bank of England

Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

Car hacking scandal

Security designed to stop thieves hot-wiring almost every modern motor has been cracked
10 best placemats

Take your seat: 10 best placemats

Protect your table and dine in style with a bold new accessory
Ashes 2015: Alastair Cook not the only one to be caught in The Oval mindwarp

Cook not the only one to be caught in The Oval mindwarp

Aussie skipper Michael Clarke was lured into believing that what we witnessed at Edgbaston and Trent Bridge would continue in London, says Kevin Garside
Can Rafael Benitez get the best out of Gareth Bale at Real Madrid?

Can Benitez get the best out of Bale?

Back at the club he watched as a boy, the pressure is on Benitez to find a winning blend from Real's multiple talents. As La Liga begins, Pete Jenson asks if it will be enough to stop Barcelona
Athletics World Championships 2015: Beijing witnesses new stage in the Jessica Ennis-Hill and Katarina Johnson-Thompson heptathlon rivalry

Beijing witnesses new stage in the Jess and Kat rivalry

The last time the two British heptathletes competed, Ennis-Hill was on the way to Olympic gold and Johnson-Thompson was just a promising teenager. But a lot has happened in the following three years
Jeremy Corbyn: Joining a shrewd operator desperate for power as he visits the North East

Jeremy Corbyn interview: A shrewd operator desperate for power

His radical anti-austerity agenda has caught the imagination of the left and politically disaffected and set a staid Labour leadership election alight
Isis executes Palmyra antiquities chief: Defender of ancient city's past was killed for protecting its future

Isis executes Palmyra antiquities chief

Robert Fisk on the defender of the ancient city's past who was killed for protecting its future