are being urged to ensure that the additional day in the year does not reduce employee pay to below the legal minimum. Non-compliance could result in a potentially large fine from HMRC.
For employees who receive salaries that incorporate hourly rates substantially higher than the NMW / NLW, there will be no entitlement to additional pay for the extra day unless there is an explicit stipulation in their contract that relates to this. Alternatively, a conscientious employer may decide to make a goodwill payment in relation to the additional day, but this would be an entirely voluntary decision. Where workers are paid by the hour or in terms of the amount of work they complete, things are much less complex as these people will feel the benefit of earning more should the additional day in the year mean that they carry out more work. This is because they are entitled to payment based on hours worked or work completed, and not to a fixed salary each year.
CIPP comment
The CIPP recognises that the area of National Minimum Wage and National Living Wage is not always the most simple or transparent as there are a number of factors that need to be considered when ensuring compliance and making sure employees don’t get paid below the legal minimum. The penalties for breaching NMW and NLW requirements can be substantial. To assist payroll professionals on this subject, we offer a one day training course – ‘National Minimum Wage and other worker entitlements’ – the next one is being held in Manchester on 22 January 2020, and you can enrol here.
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Study suggests that a substantial number of employees are paid under minimum wage 10 January 2020
Research conducted by the Resolution Foundation think tank highlights that a quarter of employees aged 25 and over are not receiving the minimum wage and are being paid below the amount required by law.
Findings have demonstrated that the practice in which firms do not comply with minimum wage requirements has become more widespread and has increased since the introduction of the National Living Wage in 2016. Prior to this, roughly one in five workers aged 25 and over was underpaid but this has crept up to more than one in four.
A spokesperson for the government spoke to the BBC to confirm:
"All businesses, irrespective of size or business sector are responsible for paying the correct minimum wage to their staff. HMRC won't hesitate to take action to ensure that workers receive what they are legally entitled to.
In 2018-19, HMRC completed over 3,000 investigations, identifying over £24.4m, the highest amount in a single year, for more than 220,000 workers.
Consequences for not complying with paying National Minimum Wage can include fines of 200% of the arrears, and, for the worst offences, criminal prosecution."
The contents of the research weren’t all as depressing, as it found that most firms actually want to pay the minimum wage, if not only due to the fines that can be imposed on them for non-compliance. The study – entitled – ‘Under the Wage Floor’ – asserts that the penalties are still not enough to deter some unscrupulous businesses from actively ignoring the law when it comes to the issue of paying minimum wage, and that the associated fines need to be increased significantly.
Experts have voiced their concern that the increase to the new minimum wage rates to be introduced in April 2020, which substantially exceed the rate of inflation, could lead to further non-compliance amongst some employers.
Lindsay Judge, senior policy analyst at the Resolution Foundation, commented
The Chartered Institute of Payroll Professionals
Payroll: need to know
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