pay floor

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A minimum rate of pay below which earnings cannot fall. The most obvious pay floor is the National Minimum Wage, established through statute in 1998, which provides for a minimum hourly rate of pay for adult workers across the entire UK economy. A pay floor might also be established within a particular industry through the mechanism of multi-employer bargaining. Industry-wide collective agreements have traditionally fulfilled this role of setting a pay floor, which might then be supplemented by further increases negotiated at company level. The benefit of establishing a pay floor, either through a statutory mechanism or through collective bargaining, is that it affords protection for the most vulnerable, least-skilled employees. It might also encourage companies to seek profit through improvements in the use of labour rather than by seeking reductions in wage rates and labour costs. [See minimum wage.]

Subjects: Human Resource Management.

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