Following on from our blog about strange excuses employers gave for not paying their staff the minimum wage, the rates are due to increase on April 1st. This will be the second compulsory pay rise in six months, pushing up costs for business owners yet again.
The National Living Wage was launched in April 2016 and set at £7.20 per hour for all workers over the age of 25. In October, the National Minimum wage was raised to £3.40 for apprentices, £4 for 16-17 year olds, £5.55 for 18-20 year olds and £6.95 for 21-24 year olds.
From April 1st the National Living wage will increase to £7.50. The National Minimum wage will also go up to £7.05 for 21-24s, £5.60 for 18-20s, £4.05 for 16-17s and £3.50 for apprentices.
There are some who are not entitled to the National Minimum and Living wages, including self-employed people, volunteers and voluntary workers, company directors and family members, or people who live in the family home of the employer who undertake household tasks. All other workers are entitled and should be paid at least the legal minimum.
The penalty for non-payment is currently 200% of the amount owed, up to a maximum of £20,000, with a minimum of £100 per worker, unless the arrears are paid within 14 days.
Failure to pay could also result in a company director being banned for up to 15 years.
The government also publishes a ‘name and shame’ list of employers that fail to pay the minimum. There are currently 687 firms on the list, owing £3.5m in wages and £1.4m in fines.
None of the 687 companies have faced criminal charges, and MPs on the business select committee have commented that these penalties are not enough.
In order to avoid falling into the trap and incurring a fine, employers should address the following five issues:
Check workers’ wage rates regularly. There have been several increases to the rates in recent years, and employees may cross over from one band to the next on their birthdays, so always remember to update your rates.
Keep an eye on deductions for items connected to the job such as uniforms, services provided by the employer such as meals or transport, or accommodation beyond the permitted accommodation off-set amount, as these could push workers’ pay below the minimum wage rate.
Top ups such as shift allowances or customer tips or bonuses do not count as pay for the purposes of these rates. Including them in payments could cause issues when calculating a workers’ pay.
Status of the worker
Be careful how you treat your employees – many employers mistakenly treat people as volunteers, interns or self-employed when they should be classed as workers. You can use the Employment Status Indicator to determine whether someone should be classed as an employee.
One of the trickiest parts of determining salary is working out when employees should be paid for and when they shouldn’t. The Working Time Directive was updated in September 2015 to include travel from home to the first and last customer for mobile workers. In addition, time spent shutting up shop or clearing security after a shift has ended, or for training, should be considered.
If you have any queries about your own employees and the National Minimum and Living wages, our Payroll department can help you find the answer.
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