The Blog

Government urged to reconsider National Living Wage

Business groups including the Federation of Small Businesses (FSB) and the National Farmers Union (NFU) have written jointly to new Business Secretary, Greg Clark, urging him to reconsider ‘ambitious’ targets for the National Living Wage (NLW).

At least 16 trade associations have recommended that Mr Clark “exercise caution” and would ideally like the Government to drop the current target, which could see National Living Wage rise from its current hourly rate of £7.20 to around £9 by 2020.

The National Living Wage was introduced in April 2016 and is paid to workers aged 25 and over. If current targets are met by 2020, the NLW will represent one of the highest minimum wages in the G7.

They have also called for the restoration of the original powers of the Low Pay Commission (LPC), the independent committee that recommends minimum wage rates every year. The original remit of the LPC was to recommend minimum wage increases that went as far as possible without costing jobs.

However, its new task is to ensure that the rate reaches 60 per cent of median earnings by 2020, “subject to economic growth”.

The letter argues that in light of the “economic uncertainties the country faces” following the vote to leave the EU, firms might find themselves unable to support such a rise.

Despite the pressure however, the Government is expected to proceed with current plans, with a Treasury spokesman saying that it is committed to building an economy that “works for all”, meaning both employers and employees.

Government urged to overhaul Minimum Wage following Brexit vote

The Government is being urged to overhaul the UK’s minimum wage policy following the vote to leave the European Union, with warnings of damage to the economy and businesses if it does not.

According to the British Chambers of Commerce, the Government’s “politically driven” approach to setting the national living wage could cause it to become “unaffordable” to hire staff.

The lobby group argues in its submission to the Low Pay Commission’s consultation on future increases that a failure to calibrate the policy could push up prices, raise unemployment and even force companies out of business.

As of April 2016, the minimum wage for workers over the age of 25 rose by 7.4 per cent to £7.20 and it is proposed that the national living wage could rise to £9 by 2020.

However, the BCC said that the decision to leave the EU means it is vital to return to an “evidence-based” approach when setting the wage floor, otherwise it could lead to increased prices or even bankruptcies.

The group argues that the national living wage policy was set before the result of the vote and therefore the Government should reassess the policy in its aftermath, taking into account new economic data and forecasts, once these become available.

It is the BCC’s contention, based on “conservative” forecasts that the minimum age should rise by 2.4 per cent to £7.39 next April because “pressing ahead blindly” towards the £9 target would hit small businesses hardest.

Given that these organisations account for over 99 per cent of all private sector businesses and employ more than 15 million people, this would be disastrous.

The end of salary sacrifice?

HMRC has revealed plans to limit tax and national insurance savings from salary sacrifice schemes.

In a 17 page consultation document released this week, HRMC stated that the government does not believe benefits-in-kind, effectively paid for by employees through reductions in gross salary, should be provided by employers at a cost to the Exchequer through salary sacrifice arrangements.

Plans were unveiled to change tax legislation so that where a benefit-in-kind is provided through salary sacrifice, it will be chargeable to income tax and Class 1A employer national insurance contributions, even if it is normally exempt.

Among the salary sacrifice schemes set to be hit are life insurance policies and mobile phone contracts, which will become taxable on employees. However, the paper did state that not all current schemes will be hit by the changes to the rules.

The purpose of the salary sacrifice consultation is to explore the potential impact on employer and employees should the government decide to implement these changes.

Several health-related benefits-in-kind such as the cycle to work scheme are not included as the government wishes to encourage their use. The consultation is also not asking for views on employer pension contributions, employer-provided pension advice and employer-supported childcare provision.

The consultation will run from 10 August 2016 to 19 October 2016 and the government is interested in hearing from employers, trade organisations and other interested parties who may be affected by the proposed changes.

The consultation on salary sacrifice for the provision of benefits-in-kind can be viewed here.

Latest in HMRC campaigns targets employers not paying minimum wage

All employees have a legal right to the national minimum wage.

Although most employers pay at least the national minimum wage, there are several common mistakes which mean that employees don’t get what they’re entitled to.

HMRC campaigns offer the best possible terms to those who voluntarily come forward to bring their tax affairs up to date. They are now providing employers with the opportunity to check that they are adhering to national minimum wage laws.

The newly launched National Minimum Wage Campaign is the latest in a series of HMRC campaigns and encourages employers who have not been paying their employees national minimum wage, or have made any errors with this, to come forward voluntarily, disclose any mistakes they may have made and pay their employees any arrears owed.

Voluntarily disclosing national minimum wage arrears through the campaign will result in more favourable terms. Those who do not do this and are caught by HMRC face penalties of up to 100% of what they owe (up to a maximum of £20,000 per employee) and will be publicly named on a list of employers who do not pay national minimum wage.

 

What are the National Minimum Wage rates?

Current rate Rate from 1 October 2015
Apprentices (aged 16 to 18 and those aged 19 or over in their first year of Apprenticeship) £2.73PH £3.30PH
Under 18 £3.79PH £3.87PH
18 to 20 £5.13PH £5.30PH
21 and over £6.50PH £6.70PH
Accommodation offset £5.08PH £5.35PH

As announced in the Summer Budget, the new National Living Wage of £7.20 per hour for over 25s will also come into effect in April 2016.

 

If you’re considering making a disclosure under the National Minimum Wage campaign or any HMRC campaigns, you will need to notify HMRC and complete a disclosure form. It is highly recommended that you seek professional advice to guide you through this process.

HMRC have released a webinar to help employers ensure you are paying at least the national minimum wage. Watch their pre-recorded webinar here: https://twitter.com/HMRCbusiness/status/580678155150757888

By continuing to use the Ormerod Rutter site, you agree to the use of cookies. more information

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.

Close