Payroll insight
Time is money
Vince Ashall MSC FCIPP, of VA Payroll Services, outlines potential problems in NMW/NLW compliance calculations
N ational minimum wage (NMW) compliance never seems to be out of the headlines these days as HM Revenue & Customs (HMRC) continues its work to ensure that employers pay their workers at least the appropriate NMW, including the national living wage (NLW) for those workers aged 25 and over. While some employers may deliberately pay their workers below the NMW/NLW, others – including, perhaps somewhat surprisingly, some well-known high-street retailers – have fallen foul inadvertently, illustrating the complexity of the National Minimum Wage Regulations 2015 (‘the Regulations’). The following calculations and examples use the current NMW/NLW for those age 25 and over; see Table 1.
Causes of non-compliance Employers may be failing to pay the NMW/NLW due to: ● confusion over the worker’s employment status ● not paying employees for all hours worked ● ignoring sleeping and travel time ● certain deductions from pay. Recent court cases involving employers in the ‘gig-economy’ illustrate the problem surrounding employment status, where a person can validly be self-employed for tax purposes but also be a worker, and thus entitled to, amongst other things, the NMW/NLW. Some companies subject their employees after they’ve ‘clocked off’ to security checks, not appreciating that this is additional time at work and therefore
needs to be paid at the relevant NMW/ NLW rate at least. Time spent on call/standby and carers on ‘sleepovers’ has caused particular confusion to the extent that HMRC temporarily suspended enforcement action for sleep-in shifts in the social care sector between 26 July and 1 November 2017. A new sleep-in shift pay compliance scheme has since been launched (http:// bit.ly/2A8ozCj). Deductions made from pay for the ‘employer’s benefit’ are another problematical area (https://goo.gl/ NpYpcv). Deductions for a uniform that the employee must wear reduces the amount of pay that counts towards the NMW/NLW, as does the administrative charge for actioning an attachment of earnings order (AEO). Example An employee aged 28, subject to an AEO, is paid a weekly wage of £281.25 (37.5 hours × £7.50) from which the £1 AEO admin fee is deducted. The pay that counts towards the NMW/NLW is now £280.25, which when divided by 37.5 results in an hourly rate of £7.47. The employee has not been paid the NLW for that pay reference period (PRP). Salaried staff problems Compliance problems can also arise with salaried staff. Salaried hours work occurs where a worker:
Table 1 NMW/NLW rates
Rate from 1 April 2017
Rate from 1 April 2018
Age Group
25 and over
£7.50
£7.83
21 to 24 18 to 20 Under 18
£7.05 £5.60 £4.05 £3.50
£7.38 £5.90 £4.20 £3.70
Apprentice *
Accommodation offset **
£6.40
£7.00
* The apprentice rate only applies to apprentices under 19, and those apprentices aged 19 and over who are in the first year of their apprenticeship. Apprentices aged 19 and over in their second and subsequent years of apprenticeship must be paid the appropri- ate NMW/NLW relevant to their age. ** The accommodation offset is a daily rate.
21
| Professional in Payroll, Pensions and Reward |
Issue 38 | March 2018
Made with FlippingBook - Online magazine maker