Pay rise for a million workers

Despite the doom and gloom about the economy, nearly a million employees can look forward to a guaranteed pay rise on 1 October.

Sick of reading bad news about the economy and the state of the nation's finances all the time?

Well, guess what?

For a change, we have some good news: nearly one million workers will be better off this week, thanks to an increase in the minimum wage.

The increase will come into effect this Friday, on October 1st.

Low-paid workers stand to gain as follows:

The Trades Union Congress claims that two-thirds of minimum-wage employees are female, so around 670,000 women and 330,000 men will receive this pay rise. Since the minimum wage came into effect in April 1999, it has increased by 64%. This has helped to narrow the pay gap between male and female employees by around 5% in the past decade.

This year, for the first time, the age of eligibility for the adult rate of the minimum wage will fall from 22 to 21 – a significant benefit for the 40,000 21 year-olds in minimum wage jobs and internships.

Every little helps

Although these increases will be welcomed by low-paid workers, they won’t have anyone jumping for joy. For example, an employee working a forty-hour week at the highest minimum wage will only get an extra £5.20 a week before deductions. Then again, over the course of 52 weeks, this comes to £270.40 before taxes, which is better than a slap in the face with a kipper!

On the other hand, it’s sometimes said that “one man’s pay rise is another man’s price rise”. In other words, some companies may use the higher minimum wage as an excuse to pass on price hikes to their customers.

Other firms may decide to cut back, prune their wage bill and lay off some of their workforce. The British Chambers of Commerce attacked the Government back in March when the increase was announced, saying “it is astounding that the Government would increase the minimum wage by 2.2% at a time when private sector wages are virtually flat”.

This is missing the bigger picture. It’s a fact that low-paid workers spend a high proportion of their income on the bare essentials of living, such as food. While overall inflation has officially fallen to just 3.1%, the price of food has soared over the last year, particularly healthy food like fruit (up 10%), fish (up 8%) and vegetables (up 5%). This puts huge pressure on households with modest incomes. Hence, it would be churlish to complain about improvements aimed at those toward the lower end of the pay scale.

Apprentice pay will be covered for the first time

There's also good news for those working as apprentices. From October 1st, apprentices will be protected under minimum wage legislation for the first time, with a new hourly rate of £2.50 for those who were previously exempt.

Good news for the public purse

As well as workers, the 2.2% increase is good news for the public purse. The Low Pay Commission calculates it will benefit the public finances by over £238 million. This is because from October 1st, workers in receipt of the minimum wage will pay £101 million more in income tax and £53 million more in national insurance. The increase is also set to save the Government £84 million in tax credits and in-work benefits.

I want a pay rise, too!

What if you earn more than the minimum wage, so aren’t set for a pay rise this week or indeed, any week in the near future? Obviously times are tough, and many of us are fighting to keep our jobs, never mind trying to increase our pay.

Still, you never know, if you deserve a pay rise, it can often be worth at least asking for one – and at least then, you’ll know you tried your best. Read Six top ways to pick up a pay rise and Get a pay rise tomorrow for tips on how be successful.

More: 10 ways to slash your supermarket spend