The chancellor’s recently mooted wish to increase the national minimum wage (NMW) to £7 per hour by 2015 has met with lukewarm responses from a range of observers.

Umbrella Company Employees who have taken time-limited contracting assignments with smaller businesses will be aware that they have far leaner resources than their larger counterparts. SMEs are inclined to hire expertise on a temporary basis for meeting business objectives in preference to risking the long-term costs of permanent hires.

With these constraints in mind, the chairman of the Federation of Small Businesses, John Allan, cautioned Mr Osborne not to be tempted to increase the NMW above inflation, as smaller firms operating within “very fine margins” were already “struggling with rising costs in areas such as utilities and business rates”.

Acknowledging that the chancellor recognised that any NMW increase was a matter for the Low Pay Commission, CBI director-general John Cridland nonetheless warned: “An unaffordable rise would end up costing jobs and hit smaller businesses in particular. Any increase in wages must reflect improved productivity.”

Chris Smith, CEO of the digital recruitment specialist Opinio Group, said that raising the rate to £7 would do little to accomplish a living wage capable of maintaining purchasing power. Speculating that the move may be motivated more by political manoeuvring than a genuine desire to improve living standards, Mr Smith questioned the wisdom of paying staff at a rate that would not be able to be converted into a return for the business above their wage value.

He suggested instead that efforts should go into developing technology that can “drive down or replace that cost”.

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