COMPLIANCE
LoraMurphy ACIPP, CIPP policy and research officer, provides an update and a reminder of recent significant developments Wages, ages
I n the 2020 Spending Review (http:// ow.ly/I8ru30ry5Bo), which was delivered on 25 November, the national living wage (NLW) and national minimum wage (NMW) rates to apply to pay reference periods commencing 1 April 2021 onwards were announced. Given the turbulence the pandemic has wreaked on the UK economy many were pleasantly surprised that each of the wage rate brackets would see an increase. The rates mean that the government’s intention to expand coverage of the NLW to those aged 23 and over, as opposed to it being restricted to those aged 25 and over, is achieved in line with the original timeframe. Changes to NMW regulations in 2020 The coronavirus job retention scheme and other measures implemented by the government to support both businesses and individuals through the pandemic dominated the work of payroll professionals in 2020. Accordingly, certain changes to NMW regulations made last year may have slipped under the radar
somewhat. It is important for those in payroll departments to be aware of these changes, not least because some of them will substantially reduce workloads for those teams, particularly amendments to rules around calculation years. Changes implemented in 2020 mean employers have the option of selecting their own calculation year for the purposes of calculating NMW. Previously, the calculation year had to be aligned with employee start dates, which proved challenging as different calculation years needed to be applied to different salaried workers, depending on their start dates. This change should alleviate some of the administrative burden associated with completing NMW checks, as now one calculation year can be applied to all workers. Employers must provide any impacted workers with at least three months’ written notice of the new calculation year, where this is to be changed. The amendments also mean that more workers can be categorised as ‘salaried hours’ workers. Previously, only employees paid an annual salary in equal weekly
or monthly instalments for a prescribed number of basic hours could be classified as ‘salaried hours’ workers. As a result of the updates to regulations, the scope of this has been widened, so that those paid in other frequencies, such as fortnightly or four-weekly, can now be defined as salaried hours workers. Additionally, salaried hours workers are now able to receive ‘premium pay’ and pay elements other than salary but remain categorised as such, whereas, historically, this was not the case. There was substantial confusion around salary sacrifice arrangements and their relationship with the NMW when the changes to regulations were initially announced in 2020. To clarify, salary sacrifice schemes must not reduce an individual’s pay below the relevant NMW amount, in any circumstances. A change that was implemented, however, means that where an employee has willingly accepted a reduction in salary in return for a benefit, and certain other criteria are met, the employer will not be publicly named nor receive financial penalties. The employer will, however, still be required to pay back any arrears to the impacted employees. Detailed guidance on this matter can be located here: http:// ow.ly/O44330rztvR. Following a brief suspension in 2018
...employers have the option of selecting their own calculation year for the purposes of calculating NMW
| Professional in Payroll, Pensions and Reward | April 2021 | Issue 69 30
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