Is minimum wage reprieve enough?

Retailers breathed a sigh of relief in May when it was announced that the National Minimum Wage was to rise by only 1.2 per cent in October to £5.80 – the lowest increase in the 10 years since it
was established. The cost has shot up by as much as 10 per cent in previous years.

According to the IDS (Incomes Data Services) Pay and Conditions in Retail 2009 report for the year to November 2008, just over half of retailers set their minimum starter rate at the existing minimum wage of £5.73 – up from a third in 2007.

Although in a period of enforced cost-cutting retailers may have hoped for a freeze, this was always going to be unlikely and could have had a detrimental effect on staff already demotivated by the current economic climate.

The British Retail Consortium had lobbied the Low Pay Commission – which advises the Government on pay terms – to cap any increase at 1.5 per cent, so was pleased the increase came in under. BRC director-general Stephen Robertson says: “Some retailers have frozen their salaries, but I suspect that in the current economic situation it would have been politically difficult to recommend a zero change.”

Generally, retailers have reacted positively. “The chief executives I have spoken to have been relieved that common sense has prevailed,” he says. For example, Jessops HR director Jo Steen says: “Given the economic climate, I think it’s fair.”

Shopworkers union Usdaw says although it would have liked a greater increase, it was pleased an increase had been given at all. A spokesman says one of its bigger concerns is a Conservative bill – currently postponed until 12 June – that threatens to ditch the minimum wage, which it believes would drive down pay across the board. A Usdaw spokesman says: “That is our biggest worry. We have been lobbying hard to make sure that doesn’t see the light of day.”

Jessops has previously paid a starter wage based on the national minimum, but has now reviewed its policies. From October, the starting wage for hourly staff will be set at 5 per cent higher
than the minimum, with a greater incremental difference for staff based in London. Steen says: “Our starter rate at the moment is the minimum wage in a lot of cases, but as a specialist retailer we believe our base rate should be ahead; otherwise we are not recognising the individual’s expertise.”

In an ideal world, most retailers want to be able to offer a similar gap between the minimum wage and their starter rates, but with costs being heavily scrutinised, that may be a luxury they can no longer afford.

2008            £5.73             +3.8%

2009            £5.80             +1.2%