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The national minimum wage increase for 2009/2010 comes into effect from today (Thursday 1 October 2009), taking the adult rate from £5.73 to £5.80 per hour, an increase of 1.2%.
The development rate (for workers aged 18 to 21 inclusive) rises from £4.77 to £4.83 per hour (an increase of 1.3%), while the youth rate (for those aged 16 and 17) rises from £3.53 to £3.73 per hour (a 1.1% increase).
The 1.2% increase to the national minimum wage adult rate is significantly lower than those seen in recent years: the statutory pay floor rose by 3.8% in 2008, by 3.2% in 2007, and by 5.9% in 2006.
Indeed, the 2009/2010 uprating represents the lowest increase since the national minimum wage was first introduced just over a decade ago, in April 1999. The annual national minimum wage adult rate increases enacted between 2000 and 2008 ranged from 2.4% to 10.8%.
The low national minimum wage increase for 2009/2010 reflects the severity of the current recession. In his introduction to the 2009 Low Pay Commission (LPC) report (PDF format, 5MB) - which set out the recommendations for the national minimum wage rates for 2009/2010 - LPC chairman George Bain explains that its latest recommendations are designed "broadly [to] keep pace with the modest growth in pay settlements and average earnings forecast for the coming year".
However, when measured against latest data on whole economy pay trends from pay specialists at IRS, the 2009/2010 national minimum wage increase almost starts to look competitive. Pay awards are in a depressed state as the recession continues to bite, with the headline increase running at a record low of 1% over the three months to 31 August 2009. More than one in three (37.6%) pay awards in the latest IRS sample resulted in a pay freeze.
So what might we expect from the 2010/2011 national minimum wage increase, which will come into effect on 1 October 2010?
Whole economy pay awards look set to remain weak over the coming year, with significant downward pressure coming from a number of directions, including: ongoing affordability concerns for employers hit hard by the recession; the expected impact on pay awards of current negative retail prices index (RPI) inflation; and the prospect of severe restraint on public sector pay awards for 2010 and beyond.
Yet the LPC refused to rule out a return to higher national minimum wage increases for October 2010 in its 2009 report. Gordon Brown, meanwhile, stated in his Labour Party conference speech on Tuesday (29 September 2009) that should Labour win the 2010 general election, it would increase the national minimum wage "in every year of the next five years."
Business leaders were critical of Brown's promises on future national minimum wage increases.
Even at this very early stage, discussions surrounding the 2010/2011 national minimum wage uprating look set to prove as protracted and as heated as those that led up to the decision on the 2009/2010 increase.
More from our colleagues at XpertHR on the national minimum wage:
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