LAW DRAFTING BRIEF
AMENDMENTS TO THE MINIMUM WAGE LEGISLATION
SECTION 1 - THE HISTORY
The Employment Law provides that Regulations and Orders may be made to set the minimum wage rates. The current Regulations and Order came into force with the Employment Law on 1st July 2005. The Employment Forum must make recommendations on certain aspects of the minimum wage before the Social Security Minister may increase the rates.
SECTION 2 - THE CONSULTATION PROCESS
At the direction of the Social Security Minister, the consultation process was undertaken by the Employment Forum during October 2006 to review the minimum wage. The intention was to announce any recommended new rates by January 2007 at the latest.
SECTION 3 – THE FORUM’S RECOMMENDATION
The Forum’s full recommendation is attached, as is the Minister’s response which accepts the Employment Forum’s recommendations for 1st April 2007, as summarised in the table below;
| 1st April 2006 | 1st April 2007 |
Minimum Wage | £5.24 | £5.40 |
Trainee Rate | £3.94 | £4.05 |
Youth Rate | none | £4.05 |
Accommodation offset | £57.32 | £59.10 |
Accommodation and food offset | £76.43 | £78.80 |
SECTION 4 – THE PROPOSED AMENDMENTS
The required amendments to the minimum wage legislation should be effective from midnight on Friday 31st March 2007.
4.1 MINIMUM WAGE RATE
The proposed new minimum wage is £5.40, to be amended under article 16(3) of the Employment Law, in the Employment (Minimum Wage) (Jersey) Order 2005. This would replace the current rate of £5.24.
Except when the trainee rate or youth rate is paid and ‘special classes of person’, as detailed in articles 36 to 43 of the Employment Law, the minimum wage rate will apply to all employees who have ceased to be of compulsory school age.
4.2 TRAINEE RATE
The proposed new trainee rate is £4.05 (calculated at 75% of the full minimum wage rate), to be prescribed by Order under article 16(3) of the Employment Law and in the Employment (Minimum Wage) (Jersey) Order and would replace the current rate of £3.94. The trainee rate is payable to employees of any age who are undertaking an accredited training course as defined by the code of practice, or approved in writing by the Minister.
Where students are undertaking a “work experience placement” as an educational requirement within an academic establishment, or as a requirement of a full time training course, they should not be “employees”, and therefore not entitled to the minimum wage, trainee rate or youth rate. Legal advice may be required in order to clarify whether an amendment will be required to the Employment Law.
4.3 YOUTH RATE
A new “youth rate” is proposed which can be made under the Employment (Minimum Wage) (Jersey) Order, to be payable at the same rate as the trainee rate of £4.05. The youth rate should apply to employees aged between 16 and 18, who are in full-time education and undertaking part-time or temporary work during the holidays, week-ends, or before or after school.
Some investigation has been undertaken as to what commonly constitutes “full time education”. A suitable definition in existing legislation has not been found and the Draftsman’s advice will be sought as to whether definition can be provided, if required. The legislation should specify that the youth rate will not be paid to students undertaking work experience placements, as discussed in section 4.2, and that the full-time education must be undertaken in Jersey.
4.4 OFF SETS
The only benefits in kind that may be offset against the minimum wage are, either for the provision of accommodation alone, or for the provision of both accommodation and food. The offsets are specified in the Employment (Minimum Wage) (Jersey) Regulations, made under article 17(5)(b) of the Employment Law and reflect a maximum offset against weekly pay for the purpose of establishing whether the minimum wage has been paid.
Where both food and accommodation are provided, the proposed maximum weekly offset against the minimum wage is £78.80, to replace the current rate of £76.43.
When only accommodation is provided, the proposed maximum weekly offset against the minimum wage is £59.10, to replace the current rate of £57.32.
It is currently possible for employers to offset an amount for accommodation, or accommodation and food, against the trainee rate. The law should be amended to prevent this, particularly in view of the proposal to introduce a youth rate, to ensure that the offsets may only be charged when an employee is being paid at least the full minimum wage of £5.40 per hour.
The Minister notes concerns regarding charges levied by some employers for utility bills, in addition to the offset for accommodation, which is contrary to the intention that only two benefits may be off set against the minimum wage. A UK Employment Appeal Tribunal has decided that the accommodation offset includes charges made by the employer for electricity and gas; however the judgement has been appealed to the Court of Appeal and is due to be heard in January 2007. The Minister accepts the Forum’s recommendation that advice and enforcement should be based on the outcome of this appeal, when it becomes available.
4.5 OTHER ISSUES
Pay Slips – Article 51 of the Employment Law should be amended to ensure that employers must give pay slips to their employees, rather than only when requested by the employee (having ‘the right’ to be given a pay statement).
The legislation must require the pay slip to include a record of the number of hours worked (actual and contractual) in each pay reference period. This is intended to prevent disputes arising where an employer has paid a flat weekly wage, despite the employee having worked additional hours. It is envisaged that this might addressed via the Regulations which specify the record keeping requirements of employers.
Variable Hour Contracts - drafting advice is requested on the issue of “pay reference periods”. Where employees are paid a regular weekly wage, but a “variable hour” system is operated over a monthly period, employers are currently in breach of the law and should amend their employees’ contracts to ‘variable hours’ and pay on those weekly hours, however evidence suggests that employers and employees prefer to average over one month. The law should be amended to provide the flexibility for pay reference periods for weekly paid employees to be averaged over “one calendar month”, if agreed by the employer and employee in a relevant agreement (as defined).
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