Between 2011 and 2018, a huge 191 companies failed to pay their staff the National Minimum Wage.
As the government recently exposed the names on the list, big household names suffered a huge knock to their reputation. Not to mention fines totalling £3.2 million between them…
Read on to discover which companies got caught out – and how you can avoid making the same mistake.
What are the penalties for underpaying staff?
Some of the biggest offenders on the list include Pret, McColl’s, and John Lewis.
Along with paying thousands back to their staff, they were hit with HMRC fines of up to £20,000 per worker.
And beyond those big names, plenty of small businesses made the list – including beauty salons, car washing companies, and care homes. No matter how big or small your business, you stand the same risk of huge fines and national bad press.
Why do companies fall short of National Minimum Wage?
It’s easy to assume companies deliberately underpay their staff.
But actually, many breaches are due to a small admin or employment law error. And without a dedicated payroll team, it’s even easier to make these mistakes.
Accidentally or not, here are the top reasons why businesses fell short of the National Minimum Wage:
If your employees wear a uniform, you might deduct the cost from their wages. And when staff earn the National Minimum Wage, any uniform deductions mean you fall below the legal requirement.
So, once you’ve deducted any costs, check you still pay at least the legal minimum. If not, you’ll need to top up your hourly rates.
If an employee works overtime, keep an eye on their average hourly rate. When your staff rack up extra hours, you could easily slip below the legal requirement – even if your employees earn above the National Minimum Wage.
When you hire apprentices, make sure you pay the correct rate. Apprentices should receive £4.30 per hour if they are either:
- Under 19 years old
- In the first year of their apprenticeship
However, when apprentices complete their first year of the apprenticeship and they’re over 19, they’re entitled to the minimum wage for their age. If you still paid the apprentice rate, you’d be underpaying your staff.
Prepare for updates each April
Each new tax year can introduce big changes to the way you pay your staff. And more often than not, that includes tweaks to the National Minimum Wage.
That’s why it’s important to prepare yourself for updates each year – and understand when the changes kick in.
While any national wage increases apply on 1 April, employers need to roll out changes from the next ‘pay reference period’. In other words, you need to pay staff their new rate from their regular pay date onwards.
So if you pay staff on the 15th each month, you wouldn’t need to start paying the higher wage until this date.
But if you pay your staff daily, the changes will kick in straight away. And if you leave it a day too late, you could still face costly fines for underpaying staff.
Avoid national naming and shaming…
Without a big payroll team, it’s much easier to lose track of key dates and major employment law updates.
And if that means you underpay staff, you face the risk of bad press and HMRC fines…
So, don’t pay the price of minimum wage mistakes. Our unlimited HR support can help you:
- Manage overtime – use BrightHR software to track staff hours, so you can calculate the correct pay.
- Sort out paperwork – if you need to adjust wages, get watertight documents to update employee contracts and secure any changes in line with the law.
- Stay compliant – with unlimited employment law advice, you stay on track with any changes that could affect the way you pay your staff.