What is the Low Pay Commission and what does it do?

The Low Pay Commission was created by the National Minimum Wage Act 1998 and is responsible for discharging the functions conferred on it under the Act. It is an independent non departmental public body.

The Low Pay Commission consists of a chairman and eight other members who are appointed by the Secretary of State.  

When the Secretary of State appoints members, it is required to have regard to the desirability of securing that there is such a balance as the Secretary of State considers appropriate between members with knowledge or experience of, or interest in, trade unions or matters relating to workers generally; members with knowledge or experience of, or interest in, employers’ associations or matters relating to employers generally; and members with other relevant knowledge or experience.

What are the functions of the Low Pay Commission?

Its advisory role

The Minimum Wage Act 1998 is what is known as a primary piece of legislation. It establishes the requirement for a minimum wage but does not, for example, set out how much the minimum wage should be. Matters such as to how much the minimum wage should be are contained in separate regulations (known as “secondary legislation”). The Minimum Wage Act 1998 gives the Secretary of State the power to make these separate regulations. However, the Secretary of State cannot simply make any regulation it wishes to make. Under the Minimum Wage Act 1998 the Secretary of State is required to obtain the opinion of, or seek recommendations from, the Low Pay Commission before it can make a regulation under the Act.

The role of the Low Pay Commission in relation to the first regulations made pursuant to the Minimum Wage Act 1998

Prior to the Secretary of State making the first regulations relating to the amount of the national minimum wage, pay reference periods and the determination of the hourly rate of remuneration the Secretary of State was required to refer certain matters to the Low Pay Commission for its consideration. These were as follows: 

  • what single hourly rate should be prescribed as the national minimum wage; 
  • what period or periods should be prescribed as pay reference periods; 
  • what method or methods should be used for determining the hourly rate at which a person is to be regarded as remunerated for the purposes of the National Minimum Wage Act 1998; 
  • whether any, and if so what, provision should be made to exclude, or modify the provisions relating to, certain classes of person; and 
  • whether any, and if so what, descriptions of person should be added to the descriptions of any person who is excluded from the act and what provision should be made in relation to persons of those descriptions.

The Low Pay Commission’s continuing advisory role

Under the National Minimum Wage Act 1998 the Secretary of State has the power, at any time, to refer to the Low Pay Commission any matters relating to the Act.  

The Secretary of State will be required to refer a matter to the Low Pay Commission if it wants to pass any further regulations, for example, ones increasing the amount of the minimum wage. 

When the Secretary of State refers a matter the Low Pay Commission will give an opinion or provide recommendations.

Its consultancy and research role

Before the Low Pay Commission can make recommendations to the Secretary of State it is required to consult with certain persons and bodies. These are any such organisations representative of employers as the Low Pay Commission thinks fit; any organisations representative of workers as the Low Pay Commission thinks fit; and any other body or person that the Low Pay Commission thinks fit. 

Before the Low Pay Commission can make recommendations to the Secretary of State it is also required to have regard to the effect of the National Minimum Wage Act 1998 on the economy of the United Kingdom as a whole and on competitiveness. It is also required to take into account any additional factors which the Secretary of State specifies in referring the matters to it. 

The Low Pay Commission carries out these functions by the following means: 

  • by carrying out extensive research and consultation; 
    by commissioning research projects; 
  • by analysing relevant data and actively encouraging the Office of National Statistics to establish better estimates of the incidence of low pay; 
  • by carrying out surveys of firms in low-paying sectors; 
  • by consulting with employers, workers and their representatives; 
  • by taking written and oral evidence from a wide range of organisations; and 
  • by carrying out fact-finding visits throughout the UK to meet employers, employees and representative organisations.

Other requirements of the Low Pay Commission relating to the recommendations it gives

In any report containing recommendations the Low Pay Commission is required to identify the members of the Low Pay Commission making the report; explain the procedures adopted in respect of consultation, the taking of evidence and the receiving of representations; set out the reasons for its recommendations; and if the Secretary of State has specified any additional factor to be taken into account, state that it has taken that factor into account in making its recommendations.