Expecting a raise

The Department of Trade and Industry has announced that the national minimum wage will increase from £4.85 an hour to £5.05, with effect from October 2005 for adults and that it will increase to £5.35 from October 2006. As this increase is well above the rate of inflation, there are already complaints from employers that it will lead to problems. The youth rate for 18 to 21-year olds will increase to £4.25 in October 2005 and £4.45 in October 2006; there is no change to the 16 and 17-year-old rate.

The government has been airing its thoughts for its agenda, should it be returned to power, especially those that are likely to buy it votes.

One of the suggestions it has floated includes increasing paid maternity leave to nine months with an option for the father to take a part of that in the mother's place.

The impact of maternity leave on small broker firms is disproportionate compared to that for larger companies. In small companies where an individual is often the only person carrying out a particular role, to lose them for quite possibly in excess of a year while they are absent on maternity leave causes very real problems.

The starting point of costs is maternity pay itself, some of which can be reclaimed from the government (company enhancement of statutory maternity pay cannot); but it is the hidden costs that the government ignores. A temporary replacement will take several months at least to learn the job and, while they are learning, you are paying out a salary that is purely 'on cost' because very little of it will have been earned.

Additionally, having obviously paid out this money, there is no guarantee that their replacement will want to stay to cover even the length of maternity leave, as most people want a permanent full-time job and, if the opportunity for one arises, they are bound to get up and leave.

An additional problem is that you end up paying holiday pay twice - once to the employee on maternity leave and obviously to the person covering for them.

To the expectant employee, the pregnancy is probably excellent news; to the employer it may not be. An increase in benefits to the employee is inevitably an increase in costs and coverage problems for the employer.

Firms should prepare in advance for minimum wage increases and the possibility of extended maternity leave.