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A decision made (01/12/2008) regarding: Employment Forum Recommendation - Minimum Wage Rates for April 2009.

Decision Reference: MD-S-2008-0081
Decision Summary Title :	L:\General Information\Workgroups\Policy\Employment\Ministerial decisions\DS 2009 Minimum Wage 26Nov08		Date of Decision Summary:	26/11/2008
Decision Summary Author:	Kate Morel, Policy Principal		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	Kate Morel
Written Report Title :	L:\General Information\Workgroups\Policy\Employment\Ministerial decisions\WR MW Response 26Nov08		Date of Written Report:	26/11/2008
Written Report Author:	Kate Morel, Policy Principal		Written Report : Public or Exempt?	Public
Subject: Employment Forum Recommendation – Minimum Wage Rates for April 2009.
Decision(s): The Minister decided to approve the Employment Forum’s recommendations to increase the minimum wage rate, trainee rate and maximum levels of offset, for implementation on 1 April 2009 and requested that an amendment to the Regulations be drafted.
Reason(s) for Decision: The Minister received the Employment Forum’s minimum wage recommendation on 30 October 2008 which recommended the following new rates to come into force on 1 April 2009; 1st April 2008 1st April 2009 Minimum Wage £5.80 £6.08 Trainee Rate £4.35 £4.56 Accommodation offset £63.47 £66.52 Accommodation & food offset £84.63 £88.69
Resource Implications: There are no financial or manpower implications.
Action required: Kate Morel to submit drafting instructions to the Law Draftsman’s Office and notify the Greffe of the pending proposition.
Signature:		Position:
Date Signed:		Date of Decision (If different from Date Signed):

Employment Forum Recommendation - Minimum Wage Rates for April 2009.

Response to the Employment Forum’s Minimum Wage Recommendation

Issued by the Social Security Minister on 1 December 2008

Background

The Employment Forum was established in August 1999 and its role and responsibilities were formalised in the Employment (Jersey) Law 2003, which came into force on 1 July 2005. The Forum has a duty to monitor the economic impact of the minimum wage and to make recommendations to the Social Security Minister regarding any future increases. If the Minister decides to not to accept the Forum’s minimum wage recommendations, he must provide a statement to the States explaining his reasons for that decision.

The Forum consulted on the minimum wage during July and August 2008 and presented its recommendations to the Social Security Minister on 30 October 2008.

Summary

The Minister accepts the recommendations of the Employment Forum to increase;

the minimum wage;
the trainee rate, and
the maximum amounts that may be offset for accommodation and food.

The Minister intends to request that the required legislation is drafted as soon as possible. This will enable draft Regulations increasing the offsets to be proposed to the States early in 2009, to come into force on 1 April 2009.

	1st April 2008	1st April 2009
Minimum Wage	£5.80	£6.08
Trainee Rate	£4.35	£4.56
Accommodation offset	£63.47	£66.52
Accommodation & food offset	£84.63	£88.69

The Minister understands that the Forum was not in a position to make recommendations on some specific issues raised during consultation given the lack of evidence available;

the structure and boundaries of the offsets;
the need for a student rate;
procedures regarding tips, gratuities and service charges; and
a minimum wage for April 2010 in light of uncertain economic circumstances.

The Minister notes that a new Social Security Minister may be in place by 2009 and so proposes that this recommendation should be reconsidered next year in view of other pressures on the workload of the Forum.

Minimum wage

The Forum recommended a minimum wage of £6.08 per hour to apply from 1 April 2009.

The Minister accepts the recommendation and would intend that, subject to the States approval of the draft Regulations to increase the maximum offsets, the minimum wage would be increased by Ministerial Order. The Minister however appreciates that a new Minister for Social Security might be in place by the time the Order is required.

The Minister understands that the proposed 4.8 percent increase in the minimum wage is greater than the average earnings increase for the year to June 2008, but is lower than the Retail Prices Index increases throughout 2008. The Minister notes that the new rate would compare favourably with rates being paid in other jurisdictions; £5.73 in the UK from this October (a 3.8 percent increase), and £6.00 per hour (a 7.1 percent increase) in the Isle of Man from this October.

As demonstrated by the table on page 10 of the Forum’s recommendation, there is only a small difference between each of the methods and indices that might have been applied by the Forum to set a new minimum wage, ranging from £6.00 to £6.12 per hour. The Minister appreciates that there is no one correct method of increasing minimum wages. Given that the minimum wage has been increased by 13.5 percent in total over three years compared to average earnings increases over those three years totalling only slightly less at 13.3 percent, the Minister considers that on this occasion it is not unreasonable to increase the percentage of the weekly average wage used in the formula from 40 percent to 40.5 percent.

The Minister would however welcome the further consultation proposed by the Forum during 2009 before it recommends new rates for April 2010 given the current uncertain economic climate.

Trainee rate

The Forum recommended a trainee rate of £4.56 per hour (which is 75 percent of the proposed minimum wage rate).

The Minister accepts the recommendation and would intend that, subject to the States approval of the draft Regulations to increase the maximum offsets, the trainee rate would be increased by Ministerial Order. The Minister however appreciates that a new Minister for Social Security might be in place by the time the Order is required.

Offsets

The Forum recommended a maximum accommodation offset of £66.52 per week, and a maximum food and accommodation offset of £88.69 per week (a 4.8 percent increase to match the proposed minimum wage increase).

The Minister accepts the recommendation and intends to submit drafting instructions to the Law Draftsman’s Office in order that the Regulations may be drafted and lodged for States debate early in 2009.

The Minister is aware that a new Social Security Minister might be appointed who does not accept the Forum’s recommendations, however the lodging of draft Regulations proposing the increased offsets will allow a new Minister to progress the minimum wage increases without delay if he or she wishes, whilst giving employers as much notice as possible of the new rates. If a new Minister did not agree with the Forum’s recommendations, the Proposition may be withdrawn.

Further consultation

The Forum recommended that further consultation should be undertaken during 2009 on a number of issues. The Minister understands that the Forum was not in a position to make recommendations given a lack of evidence on these particular matters and that it wishes to consult more widely amongst employers and employees:

The structure and boundaries of the offsets.

Some respondents questioned whether the offsets could be more flexible, particularly in relation to meals provided to employees, Good and Services Tax on those meals, and permissible offsets for other benefits in kind provided to employees. If additional flexibility were to be recommended by the Forum next year, the Minister is keen that this should be consulted upon thoroughly, as the purpose of strictly limiting and defining the offsets was to protect employees from exploitation.

The need for a student rate.

The Minister notes that the Forum supports the principles of a student rate, but appreciates that only three respondents supported a lower rate; one large retail employer and two employers’ associations. More information is necessary to determine whether students are missing out on work experience opportunities, and if so, whether the minimum wage is a contributory factor in this.

Tips, gratuities and service charges.

The Minister notes that since the Forum’s recommendation was issued, the UK Government has released its consultation regarding tips and the minimum wage1. Whilst supporting the principle of ensuring that employees receive the full minimum wage, only two comments were received regarding tips, from the Jersey Advisory and Conciliation Service and the Institute of Directors. The Minister would agree that more information is necessary about existing procedures for the payment, collection and distribution of tips and gratuities.

A minimum wage for April 2010 in light of uncertain economic circumstances.

The Minister understands that the Forum will request advice from statistical and economic experts again in 2009 in order to assess any changes in the economy. Since economic conditions outside Jersey have deteriorated significantly, it is possible that Jersey will face a slowdown in the economy in the next eighteen months and the competitiveness of local business must be taken into consideration.

The Minister would welcome the search for evidence to better inform this recommendation for further consultation next year, however notes that, as the Forum is required to consult and make recommendations under the direction of the Social Security Minister, whomever is the Social Security Minister in 2009 should have the opportunity to consider this particular recommendation next year in view of other plans and pressures on the workload of the Forum.

1 http://www.berr.gov.uk/consultations/page48902.html