Minimum Wage reform: A call for balanced and transparent benchmarks
18 July 2025
Statement re Tynwald approval of a new methodology linking the minimum wage to median earnings
Isle of Man Chamber of Commerce welcomes Tynwald’s approval of a new methodology linking the minimum wage to median earnings. This is an important step toward a more consistent and evidence-based wage-setting system, and one that supports fair pay while maintaining economic viability for employers. However, the success of this approach will depend on how the median benchmark is defined and applied. As our members have highlighted, using a combined public-private sector figure can distort outcomes, especially in a scenario where public sector pay is significantly higher and not tied to profitability or investment.
Chamber analysis also shows that:
· Public sector median earnings on the Island are estimated to be 15% higher than UK equivalents
· IOM Government payroll has grown by £163million over five years, with the largest increases in administrative roles
· A high minimum wage has a cascade effect on the median, reinforcing upward wage spirals
Summarising the views of the Island’s leading business network and its members, Chamber CEO Rebecca George commented: “We support the direction of travel, but we also want to ensure that this policy shift results in fair, workable outcomes for businesses and employees alike.”
To support implementation, we have a set out a below practical steps to strengthen transparency and protect job viability across all sectors
Reform of wage-setting framework needs to address widening public/private sector pay gap, says Chamber
Isle of Man Chamber of Commerce has issued a strong call for urgent reform of the Island’s wage-setting framework, following the release of new data that exposes a widening pay gap between public and private sector workers. While recent reforms of the minimum wage framework have been approved by Tynwald and welcomed by Chamber, the Island’s largest business network says there is still more work to do. Chamber warns that using a combined public-private sector median risks distorting statutory pay rates, with serious consequences for businesses and job viability across the Island. Read on to find out more details about the business network’s concerns.
New data reveals significant pay disparities
According to the latest data released by the Cabinet Office (Hansard W-202501-1645, 26 June 2025), public sector workers on the Isle of Man now earn, on average, £196 more per week than their private sector counterparts. This 28% differential becomes even more pronounced when pension contributions are considered, resulting in a total weekly reward gap of £386.20, representing a 55% disparity.
· Public sector median weekly pay: £902
· Private sector median weekly pay: £706
· Public sector pension contribution: £225.50/week
· Private sector pension contribution: £35.30/week
Chamber of Commerce CEO Rebecca George comments: “These figures highlight the urgent need to rethink how we set wage benchmarks. While the principle of linking minimum pay to median earnings is sound, using a combined public-private figure inflates benchmarks beyond what most employers in the private sector can afford.”
Why the median matters
The median wage serves as a key reference point for determining minimum wage levels and defining poverty thresholds. However, Chamber’s analysis highlights that the reliability of the median depends on the representativeness of the underlying data. With public sector pay significantly outpacing private sector earnings – due largely to structural differences such as higher concentrations of professional and administrative roles – the combined median no longer reflects the financial realities of most Isle of Man workers.
Key concerns for businesses
Chamber’s white paper outlines several core risks posed by the current methodology:
· Artificial inflation of wage benchmarks: The use of a combined median inflates minimum wage calculations, putting pressure on businesses operating in competitive, low-margin sectors such as hospitality, retail, and care.
· Distorted poverty measures: Inflated benchmarks lead to higher calculated poverty thresholds, potentially misdirecting welfare policies and support mechanisms.
· Widening pay gap: The growing reward gap between sectors risks exacerbating workforce inequalities and creating tensions between public and private employers.
· Private sector squeeze: With the private sector bearing the bulk of taxation and market risk, Chamber warns of an unsustainable situation where businesses are effectively subsidising higher public pay without equivalent benefits.
· Threats to business viability: Minimum wage hikes based on unrealistic benchmarks could lead to job cuts, reduced recruitment, and contraction in vulnerable industries.
Chamber’s 5 recommendations for reform
To address these concerns, the Chamber of Commerce has set out five key recommendations:
1. Adopt private sector median as benchmark Use private sector median earnings exclusively for setting minimum wage and poverty thresholds, better reflecting the income levels of most workers.
2. Develop a private sector wage index Establish a dedicated earnings index for statutory wage-setting purposes, ensuring proportional and sustainable wage increases.
3. Commission an independent pay review Conduct a comprehensive, independent analysis of public and private sector pay structures, including pensions, job roles, and cost-of-living factors.
4. Prioritise employer consultation Engage directly with private sector employers during the development of wage and welfare policies.
5. Safeguard business viability Implement practical policies to protect jobs and businesses while supporting fair pay.
Summing up
Rebecca George concluded: “Chamber supports the principle of fair pay, but we must base policies on economic reality, not distorted benchmarks. If left unchecked, this imbalance will damage private sector competitiveness and harm the Island’s long-term economic resilience. We’re calling on Tynwald to act now to restore fairness and transparency in how wages are measured and set.”