Employers split on minimum wage plan

A split emerged last night between Britain's two main employers' organisations over their policy towards the national minimum wage.

A split emerged last night between Britain's two main employers' organisations over their policy towards the national minimum wage.

On the eve of the Confederation of British Industry's national conference in Birmingham, the rival Engineering Employers Federation broke ranks by calling for a formula to uprate the wage in line with movements in the basic pay rate. But the CBI rejected any such idea and went on to mount a politically charged attack on Government red tape, workers' rights and excessive regulatory burdens on business.

Digby Jones, the CBI's director general, called on ministers to freeze plans for any new employment rights in the run up to a likely general election next summer, accusing the Government of adding £12.3bn to business costs thanks to the introduction of 15 new rights since 1997.

The CBI also criticised ministers for rushing into "hasty" legislation and for making rules that were hard to implement.

But the intervention drew an angry response from the Government, which said the total cost of all new rights was just £5bn while implementation was costing just £14m a year.

Stephen Byers, Secretary of State for Trade and Industry, said: "Any call to cut red tape must not be used as an excuse to attack basic standards for employees. If the CBI can identify areas of excessive bureaucracy, then I would be the first to take action and tackle it. What I am not prepared to do is deny people decent conditions at work."

John Monks, general secretary of the TUC, joined in the rebuttal, calling on the CBI to stop exaggerating the effects of red tape and tackle the "real problems" facing the economy - productivity and skills.

Mr Byers said OECD surveys showed that the UK had one of the least onerous regulatory environments while the CBI's own research showed that Britain had a more flexible labour market than most of its competitors.

Mr Jones maintained he was complaining about the red tape created by the new rules rather than the rights themselves. "This has led to an incalculable cost, with firms diverting resources into admin and losing opportunities," he said. But the CBI did call for plans for paid parental leave and rights for mothers on maternity leave to return to work part-time to be put on ice until after an election.

"It is also blindingly obvious that many firms have been struggling with the pace of the changes, some of which are still to come into effect. The Government must give business a breathing space,"

In a paper to the Low Pay Commission, which recommends the level of the minimum wage, the EEF argued that a retrospective analysis of basic pay should be used to determine the rate because it was a form of basic wage. But the CBI said it would oppose any mechanism that would automatically increase the level of the minimum wage every year.

John Cridland, the CBI's deputy director general, said: "What we do not want to see in the national minimum wage is an escalator in the labour market. We see it as a floor to prevent exploitation."

David Yeandle, deputy director of employment policy at the federation, said his organisation had been concerned that a predetermined formula would be seen as a "going rate" by union negotiators. However, the EEF now believes that if the minimum was uprated every 18 months any effect would be minimised.

It also said it had no objection to the adult rate - currently £3.70 an hour - being extended to cover 21-year-olds. At the moment adults aged 18 to 21 are paid a lower rate of £3.20. Mr Yeandle said his organisation was also relaxed about any attempt to bring 16- and 17-year-olds within the scope of the legislation, provided their rate was "significantly lower".