Pay Floor

Posted in Human Resource Terms, Total Reads: 186

Definition: Pay Floor

Pay floor is the minimum pay or wages beyond which payment for work should not fall. In other words it is the lower limit of pay or salary which should be given to an employee or a worker.

The most prevalent pay floor is the National Minimum Wage in UK. It was established in 1998. It sets a minimum hourly rate of pay for workers who are adult. Adult is defined as at least of school leaving age in UK. Under the National Minimum age a person should be at least 25 to get the National Living Wage however the minimum hourly wage still applies to people above school leaving age and 24 or below.

Sometimes separate industries have separate established pay floors by having multi employer bargaining. These pay floors which are separately fixed industry wise may be changed by individual companies for themselves by negotiations.

The advantages of having a pay floor are many. They give protection to the least skilled employees by guaranteeing them some minimum wages. Also having a pay floor will push companies to increase their profits and productivity by making better use of their labor cost rather than by cutting labor cost by reducing the wages of laborers or by laying off laborers.

Hence, this concludes the definition of Pay Floor along with its overview.


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