Every year, the Government increases the National Living Wage, which is also widely referred to as the National Minimum Wage.
At present, the rates, which determine the minimum pay per hour most employees are legally entitled to, look like this:
But come April 1, the current rates will increase to:
What does this mean for employers?
While the increase may be a standard UK-wide increase, there’s nothing standard about how it’s calculated, as there are several different variables, such as age and apprenticeship rules, involved.
As a result, some employers aren’t interpreting minimum wages accurately, with non-compliance resulting in them being penalised by the Government. Take major retailer, John Lewis, for instance, who reported in their 2017 Annual Report and Accounts that for some months, some of their workers had been paid less than the stipulated hourly rate:
‘We have identified that some of our pay practices, though designed to help Partners, have technically not complied with the National Minimum Wage (NMW) Regulations.
‘This has come about in the main because our pay averaging arrangements do not meet the strict timing requirements of the NMW Regulations; although Partners will, over the course of a year, usually have received the correct pay, in some months where greater than average hours are worked they will have been paid less than the hourly rate stipulated in the NMW Regulations.
‘The £36.0m exceptional charge principally relates to payments that are required to be made to recipient Partners and former Partners for the previous six years. We are now required to make good those amounts…’
While John Lewis may be at the larger end of the scale in terms of their size, this doesn’t mean that National Minimum Wage errors are only detected within bigger organisations. All companies of all sizes struggle to get these calculations correct each year and, as a result, they’re all at risk of being punished for failing to maintain compliance.
What should employers do?
It’s important businesses fully understand their National Minimum Wage obligations and what the correct associated payments are, as non-compliance can come at a real hefty price.
In February this year, the Department for Business, Energy and Industrial Strategy took the unprecedented move of naming and shaming more than 350 companies who had underpaid their workers. What’s more, as well as enforcing that all underpayments were made, HMRC also issued penalties in the region of £800,000.
With the Government really stamping down on National Minimum Wage offenders, it has never been so crucial for employers to make sure their payroll administration is accurate.
That’s where our PAYE health checks can help. They’re specifically designed to identify and rectify any potential PAYE (and VAT) problems before they’re picked up by HMRC. You’ll find out more about them in our blog, ‘Have your PAYE and VAT affairs been given a clean bill of health?’
While it may be tempting to assume your National Minimum Wage calculations are correct, it really does pay to get them checked by a professional – it’ll a) give you peace of mind that you don’t have anything to worry about and b) you won’t be appearing on the Government’s next named and shamed list.
To find out more about maintaining National Minimum Wage compliance or our health checks, contact us on 01905 777600 or firstname.lastname@example.org.