Q&A: The minimum wage

Commuters on the way to work Image copyright Getty Images

The national minimum wage for adult workers in the UK is £6.31.

Wage campaigners argue that this does not equate to a "living wage" and have called for an increase to reflect the cost of living.

Some politicians have been calling for a revision as well, with some cabinet ministers suggesting a 50p increase is needed.

There are also suggestions that a minimum wage "top-up" in areas of high costs and higher average earnings could be introduced - paid for by employers.

Labour politicians have also talked of backing a significant rise in the minimum wage, but without specific figures- and of having a higher "minimum" in some sectors of the economy.

What is the national UK minimum wage, and who gets it?

The minimum wage depends on age and whether the employee is an apprentice. Only those of school leaving age or above are eligible.

It currently stands at £6.31 for the over-21s (a rate which was increased on 1 October 2013 by 12p an hour.)

Those aged 18-20 must be paid £5.03 an hour, while under-18s receive £3.72 and apprentices must get £2.68.

The minimum wage was introduced by Labour in 1999, at a rate of £3.60 an hour for the over-22s. Workers under the age of 22 were to be paid £3 an hour.

Do employers have an obligation to pay at least these amounts?

Yes. All employers must pay workers at least the minimum wage. Recently it was announced that employers who fail to pay workers the national minimum wage will face tougher penalties.

The maximum fine for anyone failing to pay the statutory level will increase from £5,000 to £20,000 in February 2014.

The government also plans to "name and shame" companies which do not pay the right levels.

How is the minimum wage level decided?

The National Minimum Wage Act of 1998 created a minimum wage across the United Kingdom. It was part of the 1997 general election Labour Party manifesto.

Each year, the rates are reviewed by the Low Pay Commission, which is an independent body. It reports to the government in February. The commission makes recommendations to the government, which sets the rate. It is enforced by HM Revenue & Customs (HMRC).

The secretary of state can make exceptions under the National Minimum Wage Act, and has for au pairs, who are not entitled to the National Minimum Wage.

The Low Pay Commission carries out surveys to research pay and other factors. It consults employers and looks at economic data from the Office of National Statistics before making its recommendations.

What is the 'living wage'?

Many groups and politicians - including Business Secretary Vince Cable - argue that the current minimum wage isn't high enough.

Others have sought a so-called "living wage" for employees, arguing the minimum wage does not reflect the real costs of living, especially in the capital.

The Living Wage Foundation argues that companies should pay £7.45 an hour in the UK as a whole and £8.55 in London.

Both London's former and current Mayor, Ken Livingstone and Boris Johnson, are supporters.

The Greater London Authority (GLA) is among the organisations that pay the living wage to their employees. The living wage is currently calculated by the Centre for Research in Social Policy at Loughborough University, while the London living wage has been calculated by the GLA since 2005.

How much do UK workers earn?

In the year ending April 2013, the ONS said UK pre-tax pay reached £27,000 a year, an increase of 2.1% over 2012. That is a below-inflation increase for that period.

The ONS said in December 2013, the average hourly earnings before tax for UK workers were £13.60 for men and £12.24 for women.

In April 2013, 10% of full-time employees earned less than £7.28 per hour (excluding overtime), an increase of 1.5% compared with the previous year.

Based on an eight-hour day, five days a week without overtime, someone earning the adult national minimum wage would make £12,115.20p a year.

After tax, that would be £11,055.96 a year.

How many people in the UK do minimum wage jobs?

The Low Pay Commission estimates that there are 1,386,000 minimum wage jobs.

Nearly half (46%) of all low-wage workers are employed in two sectors: wholesale and retail, and hotels and restaurants. About three-quarters of a million minimum-wage jobs are accounted for by hospitality, retail and cleaning.

How do the UK's wages compare internationally?

The UK has the second-highest rate of low pay in the OECD and twice the rate in some other advanced countries.

Last year, figures requested by the Labour Party and collated by the House of Commons library showed average hourly UK wages had fallen 5.5% since mid-2010, adjusted for inflation.

That is the fourth-worst decline among the 27 EU nations. Over the same time, German hourly wages rose by 2.7%.

Only Greek, Portuguese and Dutch workers have had a steeper decline in hourly wages, the figures showed.

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