As part of National Payroll Week, pay and getting pay right, is a key focus not just for payroll teams but for everyone. Therefore, we thought it would be helpful to provide information on a critical compliance area in pay – the National Minimum Wage.
This is the first of a three articles on this subject that will appear on elev8 to help you understand it more, be aware of the issues and take action.
The National Minimum Wage is the minimum amount of pay an individual worker is entitled to receive for work performed during the time they spend working. In the UK it became law in 1998 and has since become a major talking point in society, both economically and politically.
National Minimum Wage compliance is critical to the reputation of a business and will also impact on finances, general risk profile and recruitment opportunities. It is therefore important for all Business Owners to be compliant and have clear procedures in place to control this risk area, given that it will involve a number of different departments internally, including finance, HR, payroll, operations and legal.
Understanding the National Minimum Wage
To help you begin to navigate and understand this regulatory minefield in more detail, we have listed below eight key pieces of background information you need to know when it comes to National Minimum Wage:
- It is mandatory to pay the National Minimum Wage to all workers for their working time, in each pay period that they work. Therefore, it is not good enough to just ensure they have been paid the NMW within the year – it needs to be managed on a pay period by pay period basis.
- Every April the National Minimum Wage rates are reviewed and updated. It is important to note that the Apprentice rate is only applicable in the first year of the apprenticeship if the worker is aged 19 or over. Following the first year, they must be paid at the correct National Minimum Wage rate for their age. This is particularly helpful to understand and be familiar with following the introduction of the Apprenticeship Levy and the increase in the number of apprenticeships being advertised by businesses in the UK.
- In April 2016, the Government introduced the National Living Wage for workers aged 25 and over.
- Don’t get confused between the Living Wage and the National Living Wage. The Living Wage is a voluntary amount set by the Living Wage Foundation. More information on the voluntary Living Wage can be found here.
- National Minimum Wage enforcement is undertaken by HMRC but it is the Department for Business, Energy & Industrial Strategy who are responsible for its overall governance.
- In October 2013 HMRC started their current public naming and shaming approach, creating a buzz in the media around high profile cases.
- More than 500 employers have been named and shamed in 2017 to date, with the focus on SME businesses in the retail, social care, hospitality, recruitment and hairdressing sectors.
- Fines for not complying can be costly – up to £20,000 per worker so, it is important to manage your National Minimum Wage responsibilities with care! This is in addition to the underpayments that will need to be paid back too.
In tomorrow’s elev8 eights we will look further at this topic by providing a summary of some of the key practical issues surrounding National Minimum Wage and what, as an SME, you need to look out for, given the complexities of the National Minimum Wage regulations and how underpayments can occur inadvertently.
If you have any questions about the points in the article above or would like to speak with one of our elev8 by Mazars National Minimum Wage specialists, please get in touch with us at firstname.lastname@example.org