The Impact of the National Minimum Wage

Pay Differentials and Workplace Change

Denvir A, Loukas G |   | Low Pay Commission | Feb 2007

This report investigates the ways in which firms have made organisational changes, including changes to systems of incentives and rewards, in response to any compression of pay differentials following the 2005 uprating of the National Minimum Wage (NMW).

The study comprised a two-stage process. Initially a random telephone survey of 510 small, medium and large size establishments took place to establish the extent of change attributed to the NMW since its introduction.

This was followed by 25 in-depth interviews with personnel in establishments which had made significant changes attributed to the NMW, particularly the 2005 uprating, to establish the nature of change.

The report finds a range of strategies adopted in response to the NMW, including:

  • changes in pay structures and reward elements
  • changes in staffing levels, composition and usage
  • changes in training and skill-mix
  • changes in job tasks and work practices.

The authors determine the incidence of such strategies, and explore the perceptions and experiences of employers.