ABSTRACT
In the interim six-year period between the abolition of wages councils and the introduction of the NMW, the lack of a reference point for reviewing pay created pay inertia among small HI firms, widening the pay gap between them and larger companies (Lucas and Radiven, 1998). Some two years after abolition pay had stayed the same or decreased in nearly one-third of the companies surveyed. In the absence of the review date specified in the wages order, almost half the firms had no fixed review date. Personnel directors stressed that the single major change since abolition was a new flexibility in their company’s approach to pay-setting, largely in relation to skills pay, thus widening pay differentials above the minimum rate (Radiven and Lucas, 1997a). As there was nothing to prevent the paying of higher rates under the wages councils, this may be a reflection of a relative decline in pay for those on minimum rates. The main determinants of pay reviews were the local labour market and competitors’ pay rates, followed by company economic performance and cost of living/inflation. Wages councils clearly had a significant impact upon pay determination procedures, pay levels and pay structures in the HI.
