Tax charity welcomes National Minimum Wage increase but urges broader review - LITRG press release

Published on 8 July 2015

The Low Incomes Tax Reform Group has welcomed the increase, announced today, in the National Minimum Wage (NMW) for the over 25s (the ‘National Living Wage’ (NLW) rate). It will be set at £7.20 from April 2016: 50p above the rate that will come in in October 2015 – but possibly not too far from where it would have been anyway, had it kept pace with rising prices.

Anthony Thomas, Chairman of LITRG, commented:

“According to Treasury figures, many millions of workers are set to benefit. However, the hike in the value of the NMW is likely to exacerbate existing problems with compliance, so that HMRC may have to step up their enforcement activity substantially if low paid workers are to truly benefit from the new rate. 

“Besides, even in the absence of outright employer abuse, it may still not have the intended effect for some of society’s lowest paid workers, for example, care workers, unless there is also a rethink of the underlying rules that exclude much of their travel time and unreimbursed expenses from the NMW calculation.

“The current rules say that a care worker’s pay should average out at or above the NMW once you factor in the time they spend in the client’s home, time spent travelling between their different clients during the day and their associated out-of-pocket expenses, including vehicle mileage. However, demand for home care usually centres around mornings, lunchtime and evenings, with periods of inactivity in between – and journeys home in those long gaps between client appointments are not currently factored into the National Minimum Wage calculations and neither are the costs of such travel.” 

“Accordingly, in order for care workers (and others with similar travel patterns) to receive the new headline NLW rate – and thus enjoy the increased support and improved incentives to work promised by the Government as a result of this policy, client contact time, travel between visits, and travel times between home and work (and their costs thereof) all need to be taken into account for NMW purposes. Whilst we therefore view this announcement as largely positive, we would urge a broader review of the NMW framework be speedily undertaken.”

08-07-2015)

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