TECHNICAL | 19
NMW compliance is everyone’s business
I often witness a common misconception across many businesses, that national minimum wage (NMW) compliance is simply a payroll problem. Run the numbers, apply the rates and job done. But anyone working in payroll knows the reality is far more complicated and interesting than that. Getting NMW right doesn’t just require technical knowledge, it requires intelligence, collaboration and influence that reaches across the entire organisation. In short, payroll needs a crystal ball, or, better still, a seat at the strategic table. The starting point: HR and the foundation of compliance Every minimum wage calculation begins long before payroll receives a single timesheet. It starts with a contract. Employment contracts and work agreements are where NMW work categories are established, and this is critical because under NMW legislation, there are four distinct categories of work: l time l salaried l unmeasured l output.
Each category carries its own calculation methodology, and
rules, and creating channels through which these practices can be surfaced is no longer optional. Instead, it’s a governance imperative. HMRC’s ‘show and tell’ approach HM Revenue and Customs’ (HMRC’s) enforcement activity around NMW has evolved significantly in recent years. Increasingly, investigators are adopting what might be described as a ‘show and tell’ approach. They’ll ask organisations to explain in detail how they manage NMW compliance from end-to-end, but they won’t simply take an employer’s word for it. They want the evidence to back it up: policies, payroll records, time and attendance data, contracts and audit trails. This means organisations can no longer afford to have compliance exist in silos. If payroll holds the calculations but HR holds the policies and operations holds the practice, a fragmented picture will quickly unravel under scrutiny. The strategic case The payroll function has been perceived as a back-office necessity for far too long. But the complexity of NMW compliance spanning employment law, HR policy, operational practice and HMRC enforcement makes a compelling case for payroll to operate as a strategic partner within the business. Pay professionals who proactively engage HR and operational teams, ask the right questions, educate colleagues on NMW risk and help build a joined- up compliance framework aren’t just processing pay, they’re protecting the business. The crystal ball was never going to work. Collaboration is the only answer.
misclassifying a worker’s category is one of the most common and costly NMW errors an organisation can make. Within each NMW ‘name and shame’ list published by the Government, there’s always a proportion of employers that have made errors due to misclassification. What makes this particularly frustrating is that these errors are rarely intentional. They stem from contracts that haven’t been reviewed through a minimum wage lens, or from human resources (HR) teams that simply weren’t aware of the distinction. But the contract is just the beginning of HR’s role, as HR departments also typically own the policies that sit at the heart of NMW risk. Rounding policies, time and attendance requirements, time off in lieu or ‘TOIL’ arrangements and even dress code policies can all carry significant NMW red flags. A rounding rule which seems administratively convenient may inadvertently reduce a worker’s effective hourly rate below the minimum required. A dress code requiring staff to wear a specific uniform purchased at the employee’s own cost could reduce pay in a way that creates a shortfall. These are the details pay professionals need to know about, and they won’t find them unless HR is actively engaged in the conversation. Beyond policy: what actually happens in practice Even the most well-drafted policy is only as good as its implementation, and this is where operational teams become critical. A manager on the shop floor, in the warehouse, or in a care home may not follow policy to the letter. Staff might be asked to arrive early, stay late, attend briefings off-the-clock or to complete tasks outside of their recorded hours. None of this may be captured in a timesheet, but all of it could represent an NMW risk. Payroll cannot audit what it cannot see. That’s why building relationships with operational managers, educating them on what constitutes working time under NMW
Jeni Morris
IPPE Consultant
Made with FlippingBook - Online magazine maker