SMEs need to be aware that the National Minimum Wage (NMW) is to rise by 17p - approximately 3 percent - from £5.35 to £5.52 an hour from October 2007.
Workers aged 18-21 can expect to see a rise of 15p to £4.60 an hour; while workers aged 16 and 17 will get a 10p rise to £3.40 an hour. The increases are in line with inflation and will affect 1.3 million workers in the UK economy.

The Government has been criticised in some quarters for not increasing the minimum wage to a rate above inflation, but Trade and Industry Secretary Alistair Darling said: “Just ten years ago home workers could be paid as little as 35p an hour, cleaners £1.30 an hour and security guards £2.25 an hour, which was bad for families and just plain wrong. I am proud of the minimum wage, proud of how it is helping families and proud of the role it plays in the modern economy we are delivering.”

The NMW is a legal right which covers almost all workers in the UK and became law on April 1st 1999 to prevent unduly low pay. However, unions have called for a £6-an-hour minimum for adult workers. “The Low Pay Commission [who recommended the new level] could have been bolder and kept the minimum wage rising faster than pay overall,” said Brendan Barber, general secretary of the TUC.

Employers are legally required to keep records showing that they are complying with NMW requirements. It is a criminal offence to fail to do so and businesses could be fined for not keeping adequate records. However, it is in the interests of employees to keep stringent records in the event of a dispute.

John Cridland, the Confederation of British Industry (CBI) deputy director-general, said: “The CBI had called for business to receive some relief this year. The Minimum Wage increase has exceeded average earnings growth since 2003, causing it to have a disproportionate impact in sectors such as retail and hospitality, and undermining pay and employment policies within many firms. The Minimum Wage has brought real benefits to many lower paid workers, but it is right that this year's increase took account of business reality.”

Big business can often easily absorb the increase, small businesses are often hit hardest. Cridland’s comments, therefore, can offer some support to SMEs who are already tackling increases in energy and pension costs, an imminent (also October 2007) increase in paid holidays, higher employers’ National Insurance contributions and insurance premiums.