Minimum Wage: Amendment with effect from 1 April 2013

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A decision made on 30 November 2012:

Decision Reference: MD-S-2012-0102
Decision Summary Title :	Minimum Wage 2013 Drafting		Date of Decision Summary:		28 November 2012
Decision Summary Author:	Policy Principal		Decision Summary: Public or Exempt?		Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:		NA
Written Report Title :	Minimum Wage 2013 Drafting		Date of Written Report:		28 November 2012
Written Report Author:	Policy Principal		Written Report : Public or Exempt?		Public
Subject: Minimum Wage 2013 – Minister’s response to Forum’s recommendation and law drafting instruction.
Decision(s): The Minister decided to request that the Employment (Minimum Wage) (Jersey) Regulations 2004 and the Employment (Minimum Wage) (Jersey) Order 2007 be amended in accordance with the Employment Forum’s minimum wage recommendations for 1 April 2013.
Reason(s) for Decision: The Forum publicised its minimum wage recommendation on 29 October 2012 recommending that the minimum wage and associated rates be increased from 1 April 2013, as follows;
				2012		2013
Minimum Wage (per hour)				£6.48		£6.53
Trainee Rate Year 1 (per hour)				£4.86		£4.90
Trainee Rate Year 2 (per hour)				NA		£5.71
Maximum weekly offset against minimum wage for accommodation				£70.94		£71.47
Maximum weekly offset against minimum wage for accommodation & food				£94.58		£95.29
Maximum weekly offset against trainee rates for accommodation				£53.21		£53.60
Maximum weekly offset against trainee rates for accommodation & food				£70.94		£71.47
On 23 November 2012, the Minister decided to accept the Forum’s recommendation to increase the minimum wage rate, trainee rate and revise the maximum levels of offset, as well as approving the introduction of a new Year 2 trainee rate. The Minister intends to lodge ‘au Greffe’ the amended Regulations as soon as possible.
Resource Implications: There are no financial or manpower implications.
Action required: Policy Principal to submit drafting instructions to the Law Draftsman’s Office.
Signature:		Position:
Date Signed:		Date of Decision (If different from Date Signed):

Minimum Wage: Amendment with effect from 1 April 2013

Response to the Employment Forum’s Minimum Wage Recommendation and Law Drafting instructions

Issued by the Social Security Minister on 30 November 2012

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 statutory duty to review the Minimum Wage and to make recommendations to the Social Security Minister regarding any future increases. If the Minister decides not to accept the Forum’s minimum wage recommendations, he or she must provide a statement to the States giving reasons for that decision.

In accordance with a States decision in April 2010, the Forum must have regard to the States objective that the minimum wage should be equivalent to 45 percent of average earnings within a period of 5 to 15 years, as well as having regard to competitiveness, jobs and the economy, in making its recommendations to the Social Security Minister.

The Forum consulted with the public on the minimum wage during the period 29 June to 17 August 2012 and publicised its recommendations on 29 October 2012.

Response to recommendations

The Minister accepts the following recommendations of the Employment Forum;

	2012	2013
Minimum Wage (per hour)	£6.48	£6.53
Trainee Rate Year 1 (per hour)	£4.86	£4.90
Trainee Rate Year 2 (per hour)	NA	£5.71
Maximum weekly offset against minimum wage for accommodation	£70.94	£71.47
Maximum weekly offset against minimum wage for accommodation & food	£94.58	£95.29
Maximum weekly offset against trainee rates for accommodation	£53.21	£53.60
Maximum weekly offset against trainee rates for accommodation & food	£70.94	£71.47

The Minister supports the Forum’s recommendation for a 0.75 percent increase in the minimum wage from 1 April 2013. The Minister believes that the minimum wage must be increased, but is also mindful of the economic situation and the Forum’s conclusion that this is the maximum increase that employers can absorb at this time. The Minister also notes that the resulting minimum wage of £6.53 per hour represents a move beyond 40 percent of mean weekly earnings, which takes into account the States agreed target of 45 percent of mean weekly earnings.

Having considered the extensive review undertaken by the Forum and the responses from consultation, the Minister accepts that the figure is right for Jersey as a whole in the current economic climate. On the basis that it is essential to provide greater incentives for local people to take up lower paid jobs, the Minister hopes that future Forum recommendations will move further towards the target of 45 percent of mean weekly earnings as the economy shows signs of recovery.

The Minister also supports the Forum’s recommendation for a new ‘Year 2’ trainee rate which would be paid at a higher hourly rate to an employee who is undertaking their second year of training in a trainee role.

The Minister will revise the Trainee Rate Code of Practice (the ‘Code’) to take into account the Forum’s specific recommendations relating to the trainee rate as well as the need for the Code to more clearly and simply explain what criteria must be met to permit payment of the trainee rates. As required by the Employment Law, the Minister will consult and make the Code available for representations for a minimum period of 28 days.

Law Drafting

The Minister requests that the Law Draftsman amends the legislation as follows:

Employment (Minimum Wage) Order 2007 (the ‘Order’)

Article 2(2) - The Order, as amended by the Employment (Minimum Wage) (Amendment No. 5) (Jersey) Order 2012, currently provides that the minimum wage for an employee who is a trainee is £4.86 per hour. This trainee rate should be set at £4.90 from 1 April 2013 and should be re-labelled as a ‘Year 1’ trainee rate that may be paid where a new trainee role is being undertaken for up to one year.

In addition, from 1 April 2013, a new hourly rate should be introduced for an employee who is undertaking a second year of training in a trainee role; a ‘Year 2’ trainee rate of £5.71 per hour. This is the minimum hourly rate that must be paid to a trainee who has already undertaken training for one full year in their trainee role and will continue to undertake training for up to one further year (up to a maximum of two years).

Training does not have to start from day one of employment in the trainee role; it can start at any time during the first 2 years. However, the trainee rate may only be paid while training is ongoing so, in practice, this means that, if training does not start from day one of the trainee role, an employer would have to pay at least the minimum wage and then reduce pay to the trainee rate when training begins.

An employer does not have to provide any training in the first year of employment in the trainee role in order to be permitted pay the Year 1 trainee rate in the second year of employment in the trainee role.

Employment (Minimum Wage) (Jersey) Regulations 2004 (the ‘Regulations’)

Regulation 1, Interpretation - The definition of ‘accredited training’ should be replaced with a definition of ‘approved training’ to indicate that this term covers a wider range of training. ‘Approved training’ should be defined in the Regulations as training that is either;

- Training as described in a Code issued under Article 2A of the Employment Law, or

- Training that the Minister for Social Security has approved, in writing, as being ‘approved training’ for the purpose of the Law.

The Code will then describe the types of training that are to be treated as ‘approved training’. These are anticipated to be;

- ‘accredited training’ (e.g. formal, externally certified qualifications)

- ‘in-house training’ (e.g. on-the-job, logged by the employer).

Regulation 1 also provides that “trainee” means an employee of any age who, by written agreement with his or her employer, is undergoing accredited training during the first year of his or her employment by that employer in the particular job for which the employee is being trained.

This should be amended to provide that a trainee means an employee of any age, who, by written agreement with his or her employer, is undergoing approved (rather than accredited) training at any time within the first two consecutive years of that trainee role. The maximum two year training period starts running from the first day of employment in the trainee role.

It has been suggested that it is not clear from the existing definition whether the trainee rate may only be paid where the trainee has a new job and a new employer. It is the intention that a trainee rate may be paid to an employee who has started a new job with their existing employer or a new employer (i.e. training for a new role within the same business). The definition should be revised to make this clear.

Regulation 4 states that an Order made for the purpose of Article 16(3) of the Employment (Jersey) Law 2003 may prescribe minimum wages for trainees at different hourly rates than those that apply to other employees who qualify for the minimum wage. For the avoidance of doubt, the heading to this Regulation should reflect the ability to set to different rates, plural, for trainees.

Regulation 9 – The limits on amounts that may be taken into account for the provision of food and living accommodation should be increased as follows;

Where the employer provides food and living accommodation and pays the minimum wage, £95.29 per week or £13.61 per day.
Where the employer provides living accommodation and pays the minimum wage, £71.47 per week or £10.21 per day.

Where the employer provides food and living accommodation and pays either the Year 1 or Year 2 trainee rate, £71.47 per week or £10.21 per day.
Where the employer provides living accommodation and pays either the Year 1 or Year 2 trainee rate, £53.60 per week or £7.66 per day.

It is recognised that the maximum offset permitted against the Year 2 trainee rate is the same as the Year 1 trainee rate, despite the higher hourly rate of pay.