COMPLIANCE
Jeni Morris ACIPP, head of the national minimum wage (NMW) team, EY , shares the top five questions she’s asked at this time of year, and provides the all-important answers
Do we have to pay students for work experience? It’s the time of year when many students are seeking work experience. Typically, this is for a period of two weeks, for them to gain some practical insight into the world of work. Many students undertaking work experience are of compulsory school age and are therefore not entitled to be paid the NMW in any case. However, if someone is above compulsory school age but has stayed on in full or part-time education, they would normally need to be paid the minimum wage – unless they’re undertaking a work placement as a required part of their studies. Do I include bonus payments in NMW calculations? Many employers make bonus payments to staff at the end of March, and the question of whether this payment should be included in NMW calculations isn’t always straightforward. The biggest factor to consider is what the bonus payment is actually for. Performance-related bonuses, which you can attribute to the quality or amount of work done across the course of more than one pay period will count towards NMW calculations. However, other ‘bonus’ payments, like an attendance bonus or first-aider bonus, would actually be considered an ‘allowance’ for NMW purposes. These don’t typically count towards NMW pay. n
1) When do I have to pay the increase in NMW / national living wage (NLW) rates? 2) Do I have to pay for the extra hour we all lose when the clocks go forward? 3) How many weeks are there in a year for NMW purposes? 4) Do we have to pay students for work experience? 5) Can I include bonus payments in NMW calculations? When do I have to pay the increase in NMW / NLW rates? The NMW rates typically increase from 1 April each year. However, employers are technically only required to implement the increases from the start of the first full pay period starting on or after this date. This often causes confusion as workers expect to receive the increase from1 April even if that date falls in the middle of a pay period. As an example, if your monthly pay period runs to 28th of each month, the old NMW rate will still apply from 29 March to 28 April, with the new rate applicable from the next pay period starting on 29 April. Do I have to pay for the extra hour we all lose when the clocks go forward? Unlike when the clocks go back in October, businesses don’t need to be concerned about the risk of paying under the NMW here. However, they should remember that employees will technically
be working an hour less in their shift because of the clock change; for example, an employee working an eight-hour shift will actually only work for seven. Whether the organisation will need to pay their employees for a full eight-hour shift in this situation will depend upon the contract of employment. Generally, a contract will outline that a worker is entitled to hourly pay for every hour they work. However, salaried employees in receipt of a regular salary will usually receive the normal amount, regardless of whether they work one hour less. Businesses can choose how they treat this hour lost, subject to any contractual entitlements, but should act consistently and fairly. For example, they may decide that all employees must work an extra hour to make up the ‘lost’ hour. How many weeks are in a year? No, this isn’t a trick question – many of us would think there are 52 weeks in a year. However, HM Revenue and Customs (HMRC) states it’s the employer’s responsibility to ensure they’re paying at least the NMW for all hours worked over the year. There are several possible methods, using the base number of weeks in a year as 52, including 52.14, 52.18 and 52.2857, as detailed in HMRC guidance. Be careful, as using the wrong method could result in an unintentional breach, due to not paying for the actual number of days in the calendar year.
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| Professional in Payroll, Pensions and Reward |
Issue 98 | March 2024
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