With the national minimum wage (NMW) set to rise tomorrow, business leaders have asked the government to re-evaluate plans for a second increase in 2006.
Wages will increase from £4.85 to £5.05 per hour for 1.3 million low-paid workers across the UK from Saturday. Eighteen to 21-year-olds will see their pay climb from £4.10 to £4.25 per hour, while rates for 16 and 17-year-olds will stay the same.
The government's decision to increase the NMW comes on recommendation from the Low Pay Commission earlier this year, which has also proposed a further hike a year from now to £5.35.
While business leaders have accepted tomorrow's increase, they have asked the government to reassess the need for a secondary increase in October 2006.
"Paying staff a fair wage is of course essential," said David Frost, director general of the British Chambers of Commerce (BCC). "However, the large increases seen in previous years have been well above earnings inflation.
"We have seen a worsening economic climate and recent job losses in the distribution, hotels and restaurants sector. I urge the government to reassess the planned rates and take action to give our firms the relief they need."
The Federation of Small Businesses (FSB) said the government must consider the wage increase's effects on different sectors. The group cited research showing that one in three hairdressers, one in four hoteliers and one in five shopkeepers routinely see their costs rise with the minimum wage.
"Business costs are already rising at a time when both the economy and consumer spending is slowing down," said Alan Tyrell, employment affairs chairman at the FSB.
"The government must make sure that above inflation increases in the national minimum wage do not become an annual rubber stamping exercise."
Union leaders, however, said the 20-pence hike will make a bigger difference for low-income families than it will for businesses.
"When the Low Pay Commission reviews the minimum wage later in the year, I urge it not to listen too closely to the bleatings of UK business leaders," said Brendan Barber, general secretary of the Trades Union Congress (TUC).
"A further increase next year and payment of the adult rate to 18-year-olds is easily affordable and would have no adverse effect upon either the economy or jobs."
