How to avoid National Minimum Wage underpayments

Peninsula Team

July 17 2018

In their most recent naming and shaming exercise, HMRC have publically announced the names of 239 employers who were found to have been guilty of breaking National Minimum Wage (NMW) law. The number of reported incidents shows that workers are becoming more aware of their rights and subsequently more inclined to blow the whistle on employers who fail to pay them correctly.

In order to avoid failing foul of NMW law employers must familiarise themselves with the pre-existing NMW rates. It is important to make sure correct rates are issued to all workers, especially considering 85 of the 239 organisations were found out for underpaying just one employee. These hourly rates, which change annually in April, currently start at £4.35 for under 18’s (providing they are not apprentices) and rise incrementally throughout predetermined age boundaries to £8.21 for individuals aged 25 and over. With this in mind, HR and payroll departments need to work together to ensure hourly rates are accurately reflected in wage slips as staff progress though the NMW age barriers.

One of the main reasons given by employers who failed to pay staff in line with NMW requirements was a lack of understanding around unlawful wage deductions for uniforms. In many recent examples, employers have been guilty of issuing staff with mandatory uniforms before going on to deduct the cost of these uniforms from their salaries, which having done so meant that staff were ultimately paid less than the NMW. To address this, employers should consider issuing uniforms free of charge where possible or spreading any deductions across several pay checks to ensure individuals do not end up being paid below NMW.

Another common excuse was that employers did not understand the requirement to pay apprentices a minimum hourly rate. The current apprenticeship rate stands at £3.90 an hour and represents the legal minimum for those who are either under 19, or 19 and over but in the first 12 months of employment. Clients need to be aware that once an apprentice is aged 19 and over and is no longer in the first 12 months of employment, they will become entitled to the minimum wage rate that is applicable for their age, up to and including the National Living Wage of £8.21 an hour.

Another important consideration that tends to be overlooked by employers is travel time. This should not be confused with the time spent travelling between an employee’s place of residence and their work, but rather the time when a worker is travelling for the purpose of working. Employers must pay staff appropriately for this which includes travelling from one work assignment to the next and travelling between the place of work and a place where training is being provided. Time sheets can help employers appropriately keep track of travel time and ensure staff are being paid a fair wage in line with the NMW requirements.

Given the governments continued efforts to protect employees from NMW exploitation, employers should conduct a thorough review of their pay practices to mitigate the risk of substantial fines which accompany NMW offences.

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