National Minimum Wage in Britain and Its Impact on British Model of Employment Relations - Coursework Example

National Minimum Wage in Britain and Its Impact on British Model of Employment Relations Introduction After the abolition of Industry-Based Wages Council in 1993, the introduction of the National Minimum Wage Act (NMW) in1999 was the first and one of the strongest attempts to set a standard for minimum wages for the British labour market (Dolton, et al., 2012). According to the NMW Act in Britain, almost all the workers are entitled by law to claim for a minimum pay rate per hour. The proposal of this policy was initiated during the election campaign of 1997 in the UK. The introduction of NMW has highly impacted different aspects of employment relations within the UK (Manning, 2013). The changes in the dimension of pay structure, wage limit, wage inequality and payment differentials is one of the major impacts of the policy. The practices of NMW policy have also caused various transformations in the employment situations, labour laws and working hours within the model of British employment relations (Jones, et al., 2013). Discussion History and introduction of the National Minimum Wage Act (NMW) During 1909, the establishment of the Wage Council by Winston Churchill had partially assisted the workers in the UK to protect their pay from sweated trades. This kind of trade or job was very well-known and highly practised within a number of manufacturing units within the UK (Connolly and Gregory, 2002). This procedure generally enforces the workers to work for extremely long hours in poor work conditions and for low payment (Hall, 2013). This wage council had regulated the employers of a number of different industries to restructure their wage policies while setting a minimum wage rate for all their employees. The system had survived for more than 80 years. During 1993, the government of John Major caused the abolition of this Wage Council by stating that the restructuring of wage limit in different industries had limited the employment opportunities. After long four years, the victory of the Labour Party in the election of 1997 initiated the policy of the National Minimum Wages which has been established as a regulation of the UK since 1999 (Rubery and Edwards, 2003; Waltman, 2008). During 1997, the Low Pay Commission (LPC) was established to recommend and structure the rates of minimum wages per hour for the British employees. The commission was formed with three representatives of employers, three independent candidates and three representatives of workers (Brown, 2009). According to the initial declaration of the NMW policy, all the workers who are 22 years old or above need to be paid 3.60 pounds per hour while the workers aged between 18 and 21 years should be paid 3 pounds per hour. The Department for Business, Innovation & Skills in the UK is responsible for the modification and restructuring of the NMW rates on a yearly basis. They are also responsible for issuing supporting policies to this regulation (Mason, et al., 2006). As per the latest reformation of NMW rates in 2014, all the British workers above 22 years old need to be paid 6.50 pounds per hour and all the employees within the age bracket of 18 to 21 years must be paid 5.13 pounds per hour (Dickens, et al., 2014; Davis, et al., 2014). Impact of NMW and Positive Shift in the British Model of Employment Relations The establishment of this regulation has widely impacted the employment relations within different industries of the UK. The employment relations can be defined as the legal link within the employees and employers of any organisation. The healthy employment relations describe the proper delivery of the performance of employees under a certain condition in exchange of adequate remuneration. The employment relation generates the reciprocal obligations and rights between employers and employees (Van Wanrooy, et al., 2013). Employment relations is the major vehicle that allows workers to claim their benefits and rights associated to social security and labour law which includes pay structure, benefits work hours and employment opportunities (Dickens and Manning, 2004). The changes in the payment structure and policies are the major impacts that are caused by the introduction and implementation of the NMW regulation. This impact has highly influenced the payment structure of the lower paid employees within the UK. Before the initiation of this regulation, the wage inequality within different sectors was quite high. The major victims of this inequality in payment were the low paid sectors such as care homes businesses (Machin and Wilson, 2004; Arrowsmith, et al., 2003). According to Schulten, (2012) the workers in care homes are subjected to be paid much lower than the national minimum wages which has demonstrated almost 4% of wage gap. The initiation of the minimum wage regulation has enforced these organisations to increase their wage limits for the low paid workers. Therefore, it has reduced the chances of wage theft within different organisations (Machin, et al., 2003). On the other hand, there were no particular changes in the wage structure of the employees with higher payment structure. Therefore, this practise has effectively reduced the wage gaps or income inequality within the workers of any organisation (Garnero, et al., 2014). As per Boeri, (2012), the median pay of the NMW has witnessed gradual increase over the period of time. From 2001 to 2010 it has demonstrated 52% increase in the median pay. This situation has strengthened the employment relations within the employee and employer of different organisations by improving the working condition and job satisfaction of the workers. It has also enabled the organisations to modify and change the prior model of employment relations of the organisations (Belman and Wolfson, 2014). The increase in the wage levels of the poorly paid workers has encouraged the workforce to display higher performances. Therefore, it has enhanced the loyalty of the workforce as well as the relationship between the employers and the employees (Joyce and Sibieta, 2013). The gradual reduction in the wage inequality of different levels of the workforces has allowed organisations in the UK to create sense of ownership within the employees. The minimization of inequality in the payment structure has also diminished the monopsony power of different British organisations (Gilman, et al., 2002). The monopsony power in the British organisations provokes the management to employ workers at a lower wage than the competitive equilibrium. It defines that the payment received by the workforce would be lower than the marginal revenue product of labour (Muehlemann, et al., 2013). This practise generally reduces the performances of the workforce. Subsequently, it generates various corruptions and crimes within organisations (Hansen and Machin, 2002). The abolition of monopsony power from the British organisations has encouraged the employers to reduce the employee dissatisfaction, turnover and corruptions (Reeves, et al., 2014). The establishment of NMW has also enabled the organisations in the UK to reduce the gender pay inequality that has caused huge gender pay gap. The research work by Grimshaw, (2013) has described that the application of minimum wage structure has caused significant fall in the gender pay gap of different UK organisations. As per the author, the gender pay gap has reduced from 16.4% to approximately 10.2% during the phase of 1998 to 2009. Therefore, this practice has increased the employment of women within different organisation of the UK. According to Deakin, et al., (2015), the proper implementation of NMW policy within the employment law has increased the employment rate of women workers within the labour market of the UK. During the current year, the female employment rate in the UK is approximately 65% that has crossed the average rate of women employment of European Union i.e. 58.6%. This increase in the female employment has allowed the organisation in the UK to increase harmony within their workforce. It has also enabled the organisations to increase their employment relation by introducing diversified skills of male as well as female employees in organisations (Abendroth, et al., 2013). The application of minimum wages policy has also enforced UK organisations to reduce the working hours of the employees. The increase in the fixed cost for each worker of organisations has influenced the employers to reduce the working hours to maintain their overall operation costs. Therefore, it has allowed organisations to properly abide with the Working Time Regulations 1998 of the UK Labour Law (Hall and Cooper, 2012). This practice has enabled the organisations to properly reduce the work-life conflicts of their workforce while improving the work and personal life balance of the employees. This practice has also assisted the organisations to maintain the psychological and physical safety and health of the workforce. Hence, this changes in the working hours and increased work-life balance has improved the employment relations by enhancing the employee-employer relationship within the organisations of the UK (Hall and Cooper, 2012). Improper Application of NMW on the British Model of Employment Relations Though the introduction and application of NMW policies has allowed the industries in the UK to improve their employment relations, a number of issues have also affected the desired impact of the policy (Metcalf, 2008). The minimum wage increase has majorly assisted the poor paid employees or the lower level employees. On the other hand, it has no impact on the employees with medium to higher payments. Therefore, it has decreased the gap between different skilled employees within organisation. This situation has restricted the employers to segregate between the higher skilled employees and the lower skilled employees (O’Reilly, et al., 2015). Hence, it has affected the job distribution and management procedure of organisations. The reduced inequality of the payment structure has also affected the morale and enthusiasm of the high paid employees within organisation (Metcalf, 2008; Linde Leonard, et al., 2014). The policy of the NMW is mainly designed for the full-time employees of the UK which has reduced the benefits of the part time workers. According to the data of 2012, the UK market possess near about 2.5 million of the part time workers. Therefore, a huge section of the market is still debarred from the advantages of the policies of NMW. This situation is highly affecting the employment relations of organisations with high level of part-time workforce (Schäfer and Gottschall, 2015). The minimum wage policy has only influenced the payment structure of the lower level full-time female workers within the UK organisations. On the other hand, the middle and upper level female employees as well as the part-time female workers of the UK organisations are still debarred from the benefits of increased payment as per their skills and competencies (Manning and Petrongolo, 2008). According to the statistical data of 2014, the UK organisations still demonstrate 10% gender payment gap within the full-time workers while the gender payment gap is 34.5% within the part-time employees of organisations. The data has also displayed that almost 70% of the part-time female employees are getting paid lesser than the NMW rate (Schäfer and Gottschall, 2015). These practices have affected the proper and desired utilization of the NMW policies for the improvement of employment relations of the UK organisations. This situation is affecting the healthy relationship of employee and employer within organisations. It is also restricting the management to properly utilize the diversified decision making process in the organisational management systems (Schäfer and Gottschall, 2015). According to LLoyd, et al., (2008), only 14% of the organisations in the UK possess lay union representative which limits the extent of the assistance of union in terms of embedding, enforcing and monitoring legal standards within workplaces. This situation has restricted the full implementation of the NMW policy within the organisations. The absence of lay union representative causes the incomplete compliance of the minimum wages policy (Berry, 2014). Hence, it has hugely affected the immigrant communities within different workplaces. As per Grimshaw, et al., (2014), the improper implementation of NMW policy and absence of union representation has highly affected the wage structure of the Chinese workers in London. The labour market of Chinese workers in London mainly covers the job areas of restaurant, shop manufacture, clothing and distributor (Mullally and Murphy, 2014). Almost two third of the Chinese workers below the rank of shop manager and chef in London are receiving payment lower than the minimum wage rate (Grimshaw, et al., 2014; Anderson, 2010). The improper and inadequate implementation of the minimum wage policy has also demonstrated significant impact on the employment relations of the care worker industry. Wage theft has become a very common practice within this industry that has increased the workplace dissatisfaction within the workers. During the end of 2014, 130 million pound of wage theft has been recorded for the care workers sector in the UK due to the failure of employers to pay as per the rate of national minimum wage structure. It has reduced the healthy relationship within the employee and employer of this job sector (Martin, 2015). Conclusion The overall discussion of this study has illustrated the initiation and implementation of the National Minimum Wage Act of 1999 within business sectors of the UK. The establishment of this regulation has enabled the British organisations to improve the employment relations by increasing the wage structure of the lower paid employees. This policy has also assisted in the transformation of the British employment relations by reducing monopsony power within organisations. NMW regulation has minimized the gender pay gap within organisations which has elevated the female employment ratio within the labour market of the UK. Therefore, it has enhanced the employment relations of the organisations by introducing harmony and collaboration within team structure and functioning. This process has also enabled the organisations to balance the work and personal life of the employees. On the contrary, the improper and inadequate implementation of this policy has affected and restricted the desired outcome in terms of employee-employer relationship within organisations. Absence of lay union representation within a huge portion of industries has reduced the chances of immigrant employees to avail the benefits of NMW. The part-time workers have also been neglected from the benefit of this policy. Finally, the lower paid sector of the UK, such as care sector, has been affected by the wage theft due to inability of employers to pay wages as per NMW rate. Reference List Abendroth, A. K., Maas, I. and Van der Lippe, T., 2013. Human capital and the gender gap in authority in European countries. European sociological review, 29(2), pp. 261-273. Anderson, B., 2010. Migration, immigration controls and the fashioning of precarious workers. Work, employment & society, 24(2), pp. 300-317. Arrowsmith, J., Gilman, M. W., Edwards, P. and Ram, M., 2003. The impact of the national minimum wage in small firms. British journal of industrial relations, 41(3), pp. 435-456. Belman, D. and Wolfson, P. J., 2014. What does the minimum wage do? Michigan: WE Upjohn Institute. 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