The
Committee consisted of the following
Members:
Chairman:
Christopher
Fraser
Burt,
Lorely
(Solihull)
(LD)
Campbell,
Mr. Ronnie
(Blyth Valley)
(Lab)
Carswell,
Mr. Douglas
(Harwich)
(Con)
Challen,
Colin
(Morley and Rothwell)
(Lab)
Djanogly,
Mr. Jonathan
(Huntingdon)
(Con)
Farrelly,
Paul
(Newcastle-under-Lyme)
(Lab)
Flynn,
Paul
(Newport, West)
(Lab)
Heppell,
Mr. John
(Nottingham, East)
(Lab)
Hill,
Keith
(Streatham)
(Lab)
McFadden,
Mr. Pat
(Minister for Business, Innovation and
Skills)
McCartney,
Mr. Ian
(Makerfield)
(Lab)
Mates,
Mr. Michael
(East Hampshire)
(Con)
Soames,
Mr. Nicholas
(Mid-Sussex)
(Con)
Thurso,
John
(Caithness, Sutherland and Easter Ross)
(LD)
Williams,
Mrs. Betty
(Conwy)
(Lab)
Wright,
Jeremy
(Rugby and Kenilworth)
(Con)
Chris Stanton, Committee
Clerk
attended the
Committee
Sixth
Delegated Legislation
Committee
Tuesday 30
June
2009
[Christopher
Fraser in the
Chair]
Draft
National Minimum Wage Regulations 1999 (Amendment) Regulations
2009
4.30
pm
The
Minister for Business, Innovation and Skills (Mr. Pat
McFadden): I beg to
move,
That
the Committee has considered the draft National Minimum Wage
Regulations 1999 (Amendment) Regulations
2009.
It
is a pleasure to serve under your chairmanship, Mr.
Fraser.
The
regulations do three things: first, they raise the national minimum
wage rates from 1 October 2009. Secondly, they stop tips being used to
make up pay for the purposes of the national minimum wage. Thirdly,
they rectify an anomaly, ensuring that two programmes under the
EUs lifelong learning umbrella are exempted from the national
minimum wage, in line with other similar schemes.
I shall say
some more about those three points. This year, the minimum wage
celebratesif a piece of legislation can do thatits 10th
birthday. Despite the controversy at the time of its introduction, it
has become an accepted feature of the British employment landscape. It
has also become a vital one, because today, in more difficult economic
times than have existed for much of the minimum wages short
history, it provides an important floor below which wages cannot fall,
and a level of protection for all workers. To ensure that the rates
properly take account of economic circumstances, they are reviewed
annually by an independent body made up of employers, trade unions and
academicsthe Low Pay
Commission.
This
year, in the wake of the worst financial crisis in decades and other
economic problems raised by the recession, the commission has been
doubly concerned to make sure that it gets its recommendations right,
so the Government allowed it to take extra time and consider more data
than normal before making those recommendations, although we have not
delayed the timing of the uprating itself, which happens in October
each year.
Reporting
later than usual to the Government gave the commission time to access
additional data, including a further inflation report from the Bank of
England, employee job figures from December 2008, gross domestic
product data for the fourth quarter of 2008, and average earnings
information until January 2009. The commission also conducted a further
analysis of the recession and sought additional views from
stakeholders.
In
undertaking that work, the commission had two primary considerations.
The first was to make sure that low-paid workers were paid fairly
during tough economic times. It also wanted to ensure that struggling
businesses
could cope with any additional costs that may come their way through a
rise in minimum wage rates. Taking all that into account, the
commission published the recommendations in May and suggested that the
adult rate rise by a modest 1.2 per cent., with the other rates rising
between 1.1 and 1.3 per cent. Those increases are modest, but I think
that we all understand the reasons why the Low Pay Commission would
recommend modest increases this year.
The
important point is that the recommendation from the LPC, which includes
representatives from both businesses and trade unions, was unanimous.
The CBI said of these recommendations:
Over
the past decade, the minimum wage has risen faster than average
earnings and inflation and a sensible, cautious approach now will help
ensure this landmark piece of legislation continues to improve the
lives of low paid workers for many years to come.
The TUC
said:
Low
paid workers will be relieved to see a further increase in the minimum
wage this year. The Low Pay Commission was right to withstand pressure
from business to freeze the minimum wage.
Nearly 1 million
people stand to benefit from these increases if our regulations are
passed today. The minimum wage will still be significantly higher in
real terms and as a proportion of average earnings than was the case
when it was introduced a decade
ago.
The
second purpose of the draft regulations is to deal with the issue of
tipping, which is a basic principle of fairness and common sense. Under
the current law, all workers are entitled to receive the minimum wage.
However, the current legal situation allows employers, in some
circumstances, to use tips to boost pay levels to the legal minimum.
Although that is legal at the moment, and although it is used only by a
minority of restaurants and other tipping businesses, I do not believe,
and neither do the Government, that that is in line with
customers expectations. When someone leaves a tip in a
restaurant, they do not expect it to be used to make up basic
paythey believe it is additional to it. Most customers probably
think that that is already the case, and most of the time, it is, but
the Government believe that it is right to make the change so that in
future, all tips, gratuities and service charges, whether left in cash
or paid by credit card, cannot be used to make up the minimum wage. It
will create legal clarity for employers and bring an important measure
of justice to service workers.
Often, the
people who wait on tables, clear our plates and look after us every day
do not have the strongest voice either in politics or in the workplace,
but by making the change, the Government are ensuring that they enjoy
fairness at work and the measure will achieve that. It is a change I
have wanted to introduce since taking up this post. I would like to
place on record my thanks to all of those who campaigned for it: the
trade unions; my right hon. Friend the Member for Makerfield, who
introduced the minimum wage 10 years ago, and who has campaigned and
supported the current proposed change; my hon. Friend the Member for
Linlithgow and East Falkirk (Michael Connarty), who introduced a
ten-minute Bill on the issue; the newspapers, especially the Daily
Mirror and The Independent, which ran fair tips campaigns
and the many other hon. Members who have spoken in favour of the
change.
After all
that campaigning, the regulations before us today make it clear that in
no circumstances will service charges, tips, gratuities or cover
charges be used to pay the national minimum wage. We conducted a
12-week consultation on the changes. We believe that the regulations
have broad supportin fact, three quarters of those who replied
to the consultation, including businesses and unions, welcomed the
change. If we approve the regulations today, it will become law from
October.
The
third measure that we are introducing today is about ensuring
consistent application of the rules. The European Unions
lifelong learning initiative supports member states policies on
employability, lifelong learning and social exclusion. It gives
students the chance to gain work experience in other countries. Work
placements under one of the programmes under the lifelong learning
umbrellathe Leonardo da Vinci schemeare specifically
exempted from the national minimum wage. However, work placements
carried out in the same way under two similar programmes, Comenius and
Erasmus, are not subject to the same exemption, so the regulations will
ensure that work placements under Comenius and Erasmus are exempt from
the minimum wage. The changes will affect a relatively small group of
students coming from abroadfewer than 2,000 per yearand
the activity they do is usually learning or work experience, rather
than the kind of paid work that one associates with the minimum wage.
Other work experience programmes associated with study are also exempt
from the minimum wage, and again that will create consistency and
clarity.
This
debate is an annual affair in the parliamentary calendar and today, as
in previous years, I ask the Committee to approve the regulations,
which will give an important, if modest, pay increase to nearly 1
million workers and, importantly, extend justice to service workers.
They will guarantee fairness for workers, put legislation in line with
public expectations and create a level playing field for employers. For
those reasons, I commend the regulations to the
Committee.
4.39
pm
Mr.
Jonathan Djanogly (Huntingdon) (Con): We shall not oppose
any of the regulations this afternoon. Taking the easy one first, we
have no problem with workers who participate in the Erasmus programme
not qualifying for the national minimum wage.
As for the
increase in the national minimum wage, as I have said, we are not
opposing it today. However, we are currently experiencing deflation in
this country, and I noted that the Minister referred to the need to
keep struggling businesses in mind. He therefore needs to put on the
record why the national minimum wage is being increased at all at this
time, albeit to a modest extent.
We agree
with the Low Pay Commission that these are unprecedented times for the
national minimum wage and that a cautious approach is the only option.
The Low Pay Commission says that pressures on average earnings are on
the down side and that the forecast on earnings in the fourth quarters
of both 2009 and 2010 could prove optimistic. With that in mind, will
the Minister justify how any increase in the national minimum wage is
correct at this time?
As for the
exclusion of tips and service charges from the national minimum wage,
we have long argued that the national minimum wage should be paid to
staff with
no deductions made for tips, service charges and gratuities, so we are
pleased that the Government have at long last recognised that that is
the sensible thing to do. When members of the public go to restaurants,
they believe that the tips that they leave go directly to the staff who
served them their meal or drinks. We have long believed that employers
should not be able to use tips to top up wages to the
level of the national minimum wage. Any tips that workers receive
should be in addition to the national minimum
wage.
In
general, the CBI supports the principle that tips should not be
included in the national minimum wage, but it believes that a delay in
amending the regulations is desirable. That is not a view that we
share, but would the Minister tell us what representations he has
received on the timing of this amendment to the regulations? Are the
Government confident that businesses can afford the change at this
time?
We are sorry
that the Government have not gone further in this area. We accept that
it is for individual companies and not the Government to dictate their
own policies and to decide how tips should be shared, preferably after
staff consultation. However, we would have introduced a requirement for
individual companies to be transparent by issuing their own policies on
tipping and service charges, and to ensure that the policy is made
clear to patrons in writing so that customers can make an informed
decision as to whom their tips are paid. Should tips go to the
individual waiters who served the customer, should they be shared more
widely with the whole team, or should they be retained by the
company?
I would say
that tips should go to the staff, but these are not questions that the
Government should be answering; they are questions for individual
companies to answer. What concerns me is that customers should know
what companies decide, so that they can decide themselves if they like
the policy or not. The British Chambers of Commerce supports a mark or
standard that could be awarded to those restaurants where all of the
tips go to staff. Has the Minister considered that idea as an
additional measure that could be implemented, perhaps outside the
regulations?
4.43
pm
Lorely
Burt (Solihull) (LD): Like the hon. Member for Huntingdon
(Mr. Djanogly), we will not oppose these measures. In fact,
we will go a little further and say that we support
them.
The
national minimum wage increase is very modest and I take the
Ministers word that the way in which these modest figures of
4p, 6p and 7p for the three age ranges have been arrived at is fair and
appropriate. It is important that, at each anniversary of the national
minimum wage, the levels are reviewed in one way or another, because it
is important that we keep the national minimum wage moving in the eyes
of parliamentarians and, more importantly, in the eyes of those
low-paid workers who look on Parliament as an organisation to protect
their interests, because if Parliament will not protect their
interests, very often there is nobody else who will.
Regarding
the third measure, the Erasmus and Comenius programmes seem to be
absolutely fine, fair and appropriate. As for tips, services and
gratuities, we have strongly
supported the proposal in that area and we are delighted to see that,
from October, this injustice will be rectified. It is important, not
only for the staff, who will now receive their tips, without their
going towards their national minimum wage, but also for customers. I
have been to restaurants and hesitated over whether to put the tip on a
credit card or to leave the cash. I have found myself asking staff,
Will you actually receive the money if I put it on my credit
card?, and the answer has very often been, No.
There should be a level playing field for all restaurants, so a
restaurant that has been subsuming the tips into the national minimum
wage will not gain a competitive advantage through what I would
describe as meanness. The measure is therefore important for the
customer and for the general competitive environment.
I am
intrigued by the comments from the hon. Member for Huntingdon about
whether company policy should be that tips are distributed among all
staff, even those whom the customer cannot see, or among
customer-facing serving staff only, and about whether that policy
should be published. I am interested to hear how the Minister feels
about that.
Mr.
Ian McCartney (Makerfield) (Lab)
rose
Mr.
Nicholas Soames (Mid-Sussex) (Con): Stand
up.
4.46
pm