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From the 1st October 2015 the new National Minimum Wages (NMW) came into force
|Year||21 and over||18 to 20||Under 18||Apprentice*|
|2015 (from 1 October)||£6.70||£5.30||£3.87||£3.30|
|2014 (current rate)||£6.50||£5.13||£3.79||£2.73|
With a further increase in April 2016 for over 25’s to £7.20 per hour. The April 2016 wage will be called the Living Wage.
Penalties for non compliance are already harsh and as reported by the BBC on 1st September 2015 they are getting tougher…
These include doubling penalties for non-payment and disqualifying employers from being a company director for up to 15 years.
The government also announced plans to double the enforcement budget for non-payment and to set up a new team in HMRC to pursue criminal prosecutions for employers who deliberately do not pay workers the wage they are due.
Penalties for non-payment will be doubled, from 100% of arrears owed to 200%, although these will be halved if paid within 14 days. The maximum penalty will remain £20,000 per worker.
Are you paying enough?
On the 3rd April, to coincide with the 15th anniversary of the introduction of National Minimum Wage, HMRC issued a list of the worst and most elborate excuses given to their officers in the last 12 months.
- An employer said a woman on the premises was not entitled to NMW as she was his wife. When asked what his wife’s name was the employer said “err.. her name, err what’s your name love?..”
- An employer told HMRC: “I don’t think my workers know anything about the NMW because they don’t speak English.”
- Another employer told HMRC: “When the NMW goes up I do increase the amount I pay a little, even if the total pay is still below the NMW. I don’t think its right to ignore the rises in NMW.”
- A number of employers were paying rates below NMW, suggesting that accommodation they provided workers made up for their shortfall in wages.
- Upon inspection an employer told HMRC: “I know I am paying them too little, but they are happy to work for this amount because they are getting experience.”
- An employee claimed to be just working for a few days with a view to buying the business. When HMRC checked food safety records, the employee’s name was found on historic food temperature records.
- An employer claimed they realised they were not paying employees NMW and had just this week increased their wages… to an hourly rate which was still below the minimum wage.
- An employer told HMRC: “It wasn’t a conscious decision to say ‘I’m not going to pay this’, but I’ve never really considered doing it because I’ve not had people come to me and say, ‘I’m not getting paid enough’ or ‘Is this the minimum wage?’”
- An employee ran out of the premises when HMRC officers arrived to check for NMW infringements. The same employee then returned – minus the work pinafore – pretending to be a customer.
- Another employee claimed to be a friend of the owner and only in the restaurant as they were in the area. HMRC officers returned another day to find the person in the kitchen preparing food.
Jennie Granger, Director General of Enforcement and Compliance, HMRC, said:
Most employers are honest and pay their staff the correct rate. But this research shows that some still view the National Minimum Wage as a choice and will even try these crazy excuses to avoid paying workers what they are due.
Last year, HMRC’s investigations resulted in over 26,000 people getting a share of £4 million in back pay. HMRC investigate all complaints of employers failing to pay minimum wage. We will take action to recover back pay for employees and fine employers who are not playing by the rules.
HMRC officers work hard across the UK to ensure that everyone is paid at least the National Minimum Wage, and anyone who isn’t should call us.
At the end of last year there was a clamp down on the Fashion Industry, the main target was companies that advertise for unpaid trainees (interns). Its likely this will lead to an even bigger campaign in 2014.
Current minimum wages rates are
21 Plus £6.31
18 to 20 £5.03
Under 18 £3.72
If you take on unpaid trainees without a contract you could be at risk of a £5,000 fine. The penalty can also apply if you are paying below the minimum wage.
If you find that you are paying below NMW you need to correct the rate of pay now and back date it to avoid the risk of a penalty.
A recent experience of a client being selected for a National Minimum Wage review by HMRC led me to recommend some changes to their payroll process.
Like many businesses this one paid its staff by the day and adjusted for absences such as unpaid sick. Some of the staff were at or just above the minimum wage for their age, so increasing the risk of an error pushing them below the minimum. HMRC conducted a check which spanned several months, with much to-ing and fro-ing over detail and found some errors which had resulted in a few staff being underpaid small amounts.
Having gone through the results with the client I suggested some changes to the payroll process:
- Stop basing pay on a daily rate, pay by the hour instead.
- Implement a simple timesheet process, where hours per day are recorded and the employee signs it at the end of the pay period as a correct record of hours worked.
- Where staff are on piece work, ensure the equivalent hourly rate is calculated to check it is above the minimum wage.
- Check each month for staff birthdays or other changes in circumstances that might change their minimum wage level.
So if you pay by the day, it is worth checking you can easily produce records of the actual hours worked. My client has only a few employees, so can manage with a paper record, if you have enough staff to warrant a computerised time recording system, this may be worth considering.
Chris Dixon, Eightoaks