With minimum wage rates increasing annually, greater numbers of casual workers and confusion arising from the concept of “working time”, non-compliance with minimum wage legislation is a growing risk for employers. Accountants Newby Castleman have highlighted several potential pitfalls for businesses to watch out for following last month’s legislative changes.
As of 1st April 2019, the National Minimum Wage (NMW) hourly rate rose to £7.70 for those aged 21 to 24; £6.15 for ages 18 to 20; £4.35 for under 18s; and £3.90 for apprentices. The National Living Wage (NLW), for those aged 25 and over, has risen since its beginnings in 2016 to £8.21 per hour. Since its introduction 20 years ago, the National Minimum Wage has ensured that the lowest paid have seen their hourly pay grow faster than all other workers.
With this transformation has come a long list of grey areas of which employers could, and do, fall foul. Last year, almost 200 UK employers were found to have paid below the minimum wage; some cases were as a result of failing to reimburse expenses and requiring staff to attend unpaid work-related commitments. Non-compliant employers are required to reimburse their staff and pay arrears of up to £20,000 per worker. Additionally, penalties of up to 200% of arrears may be levied.
Some of the most common catches are as follows:
Working time, tips and other traps. Overtime, job-related travel time, regular “early starts” and required presence after-hours all count as “working time” and must be paid at or above minimum wage. Tips do not count towards the NMW or NLW, and work-related costs such as staff uniforms must be reimbursed.
Exceptions and exemptions. Those who are self-employed, volunteers, company directors, work experience students and members of the armed forces are not eligible for either the NMW or the NLW. Casual, agency, home and commission workers, on the other hand, must receive the minimum rate, as well as trainees and part-time workers.
Be aware of the apprentice rate. The apprentice rate applies to those under the age of 19, or those over 19 who are in their first apprenticeship year. All other apprentices are entitled to receive at least the NMW or NLW.
National Living Wage or Living Wage? Note that the government’s NLW is a legal rate requirement, whereas the Living Wage is set by the independent Living Wage Foundation and is calculated according to the UK basic cost of living. Employers can opt to pay the latter voluntarily.
Annalise Lovett, Partner at Newby Castleman, says: “HMRC is increasingly clamping down on employers who fail to comply with minimum wage rates. Employers who pay staff at or close to the minimum rate must be particularly careful not to inadvertently breach the rules. It is imperative for employers to regularly review their pay scales and policies and clarify any areas of doubt.
“With a great many risk areas to contend with, seeking professional advice on how to ensure compliance may well prove worthwhile given the hefty fines that can be imposed for infringing the rules.”
Newby Castleman is one of the Midlands’ leading independent accountancy firms, with offices in Leicester and Loughborough. It offers a range of specialist financial services, business and tax advice for individuals and businesses. For further information, telephone the Leicester branch on 0116 254 9262, the Loughborough branch on 01509 263500 or visit the website at www.newbycastleman.co.uk.