COMPLIANCE
NMW and apprentices – ‘you never stop learning’
Jeni Morris, head of the national minimum wage (NMW) team at EY explores a common area error relating to compliance with NMW regulations
T hroughout my career, I’ve supported hundreds, if not thousands, of employers with their NMW investigations. In my experience, HM Revenue and Customs (HMRC) will always take an interest in apprentices and trainees within a business, as this is often an area where common mistakes are made. In the month when we celebrate National Apprenticeship Week (6 – 12 February), I want to shine a light on the various minimum wage considerations that taking on apprentices can raise for employers. Paying apprentices the wrong minimum wage rate is a common error for employers. Recent information from HMRC pointed out that as many as one in four NMW underpayments include some sort of link to apprentices. This issue can present itself in a few different ways – but each can be costly if they come up in an HMRC investigation. Getting the first steps right is crucial The first hurdle can be where an employer refers to someone as an apprentice – but they don’t fit the strict criteria set out by HMRC. Step one To be considered a genuine apprentice for NMW purposes, there must be a contract of apprenticeship in place – whether that’s
through a training provider or direct with the employer – alongside a structured learning plan setting out work, study and qualifications gained. An apprenticeship must equip the individual with a skill, a trade or a profession – and not just show them how to do a specific job. To strip it back even further, there must be a clear distinction between a ‘worker’ and an ‘apprentice’ in any business. Step two Clarity is required as to when the apprentice should and shouldn’t be paid the apprentice rate. Only once the ‘tripartite agreement’ has been signed by the employer, apprentice and training provider can the apprenticeship rate be used. A common risk is when an employer recruits in July, but the training doesn’t commence until the new college year, in late September. From July to September, the individual won’t be counted as an ‘apprentice’ and will need to be paid at the NMW rate for their age. The NMW apprentice rate is applicable to those aged under 19, or those 19 and over in the first year of their apprenticeship. Those over the age of 19 who are no longer in the first year of their apprenticeship should be paid at whatever NMW rate they’d normally be due. Obviously, if someone over the age
of 23 is incorrectly being paid the much lower apprentice rate, underpayments can become very costly, very quickly for employers. So, once you’ve established someone is a genuine apprentice and you’re paying them the correct rate – what else should you be on the lookout for? Step three The next big risk is not paying for all ‘working’ time. All time spent studying and training as part of an apprenticeship counts as work and should be included in pay calculations. It doesn’t matter where it happens – in the office or at home – it still counts. It’s important to remember that individuals learn at different speeds and not everyone’s study time will be exactly the same. The potential for underpayment doesn’t end there. Paying at the apprentice rate means there’s no wiggle room for any other common errors or issues that arise with NMW, such as the treatment of deductions and payments. In certain trades, it’s common practice for workers to purchase their own tools or uniforms for the job, for example: l trainee mechanics (toolboxes) l hairdressers (scissors) l chefs (knives). If this is a requirement, then the costs of these purchases will reduce the worker’s pay for NMW purposes. n
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| Professional in Payroll, Pensions and Reward |
Issue 87 | February 2023
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