On the 1st April 2010, almost exactly ten years after ShopWorks began providing cloud-based work force management software, the UK National Minimum Wage increased to £8.72 per hour for over 25s. This got me thinking and I checked out the minimum wage from 2010 and it was £5.93.
I thought it would be a good idea to look at some of the trends in employment that ShopWorks has witnessed in this ten-year period during which we have helped companies in the retail, leisure and hospitality industries plan and schedule millions of shifts, manage hundreds of thousands of days off and ensure they are all correctly paid for and comply with relevant labour laws.
In 2010 managing and employing staff was a less regulated environment and regulations were less stringently enforced. However, the decade since has seen government place increased cost of staffing and compliance on employers.
Consider some of the changes that employers have had to contend with since 2010:
- A 47% increase in the minimum wage
- A 1% increase in employer’s national insurance contributions in 2011
- The 0.5% apprentice levy in 2017
- Auto enrolment of pensions in 2012 which meant the state made employers pay for contributions for staff, now at 3%
- A European Court of justice ruling in 2014 that meant that staff leave should be based on the average pay over the previous 12 weeks and not based on their contracted hours. Based on data that ShopWorks has on contracted hours and leave allocation over the last ten years we believe that this increased the cost of holiday pay from c7% of the hourly rate to c12%.
- Name and shame campaign by HMRC for infringements over £100. Any employer who has been inspected by a National Minimum Wage Officer will attest to the massive increase in enforcement that has happened in the last ten years.
Taken together all these changes mean that the cost of employing someone in 2010 on the national minimum wage was £6.70 per hour a cost that has now risen to £10.67, an increase of 60% during a period when the consumer price index has risen by 22%.
Impact on staff and employment.
Currently an employee on the top rate of National Minimum Wage working a 40-hour week will earn an annualised salary of just over £18,000. According to the UK Office for National Statistics, the median salary is just over £30,000 per annum. This means that the employee on National Minimum Wage needs to survive on almost exactly 60% of the median UK salary. This is a success for government who have delivered on a promise to low paid worked, as one of the original objectives of the National Living Wage was “with the aim of reaching 60% of median UK earnings by 2020”. In July 2015 when it was announced by then Chancellor, George Osborne, the minimum wage was £6.50 per hour for over 21s and that equated to 48% of the median UK salary for someone working 40 hours per week. The increase from 2010 is broadly similar because before 2015 the national minimum wage simply kept pace with median earnings and it wasn’t an objective to reduce the gap.
Thus, in the space of 10 years, UK employers have increased money spent on staff who are on the National Minimum Wage by 60% whilst the median UK salary has increased by only 17% over the same period (a figure much more consistent with the CPI increase of 22% over the same period).
What is very interesting is the impact on employment. The UK unemployment rate in 2010 was 7.9% and was heading to a post 2008 financial crisis peak of 8.1% in 2011. Today the percentage unemployed is less than half that figure at 3.8% in 2019
In 2019 the UK economy delivered a record 32.54 million jobs that means that 3.8 million new jobs have been created since 2010. https://www.bbc.co.uk/news/business-46958560 This represented almost full employment prior to the Covid-19 crisis.
Unions and other pro staff groups will point to initial business fears about the impact of the National Minimum Wage being over played, however we believe that employers deserve enormous credit for managing the growth in employment and costs simultaneously. They have done this through innovation in the core offerings an ability to add more value in a low inflation period and also through the use of new tools such as ShopWorks.
We are proud to have supported employers with this record growth in both job numbers and growth in real earnings and giving employers the ability to plan, budget and schedule shifts whilst ensuring people get paid the correct amount for the hours they have worked. We have provided an important tool which has allowed employers to deliver these amazing results whilst retaining control of costs and ensuring they remain the right side of a wave of new regulatory and compliance challenges.
We look forward to reviewing progress over the next ten years and continuing to support employers as they recover from the Covid-19 crisis and inevitably have to deal with yet more challenges, increases in staff costs and regulations.