Payroll insight
Has the introduction of the NLW impacted minimum wage compliance processes? Do you think implementing the projected NLW rate at ‘60% of median earnings by 2020’ will change procedures? Samantha Mann: Yes, it has had an impact. I also believe there is a rising awareness of the risk it presents to employers who believe that if they pay rates in excess of the NLW they won’t be found to be wanting during a compliance visit. The introduction of the NLW is having a bigger impact on some sectors such as tourism, hospitality, retail and the care sector. Surveys and anecdotal evidence informs us that the introduction of NLW has caused many members to revisit their procedures together with a total overhaul of all processes to see how greater efficiencies can be made that counter the increase in hourly rates. At a roundtable meeting with the Low Pay Commission during the summer, there was a very real concern raised about the impact the NLW has on diminishing profit margins and ultimately the impact this will have on service delivery. For some sectors the challenge to continue to be a good employer providing a wide range of employment benefits as well as beneficial above-minimum-wage hourly rates when coupled with complex NMW regulations has increased the burden of daily compliance. Simon Parsons: Not yet although eyes are starting to be opened. As HMRC increasingly find unintentional breaches of NMW/NLW law and enforce back payments and fines, then employers will start the process of looking more closely at their practices and effect change. Maria Hartley: It will not necessarily change procedures; however, it will have an impact on business practices because as the payroll bill increases it may affect the recruitment process as there will be a narrowing of pay between job levels in order to keep costs low i.e. removal of a management level. Richard Blackwell: We already monitor hourly rates being paid each pay period – we are a predominantly ‘hourly’ paid business – and take steps to rectify any rates that are inadvertently entered incorrectly. Pre-booked holiday can be set
checking processes. Culturally the organisation does not pay below the NMW/NLW rates published, so any corrective action is implicitly sanctioned. Simon Rice-Birchall: Usually in my experience this falls within HR. I think it should do because terms and conditions of employment, which are usually the preserve of the HR team, are key to calculating the NMW/NLW. HR tends to work very closely with payroll on this subject. Samantha Mann: Over recent years we have seen a growing trend for organisations to have a single individual with the responsibility and thus the power to ensure application of legislation on specific requirements e.g. General Data Protection Regulation and gender pay gap reporting – with that individual ideally being the chief executive officer or someone who has a seat at ‘board level’. This is because individuals with boardroom level seniority should have responsibility to ensure that processes and procedures are in place to deliver full compliance. To achieve full compliance, however, will require good communications and team work across a number of teams (which will vary depending upon the size and set up within an organisation); at an operational level this should clearly sit within payroll as it is these professionals who have responsibility for delivering compliance at the coalface. Are there any specific areas of compliance that are particularly difficult? And is the official guidance clear enough on these? Maria Hartley: The areas that are particularly difficult surround what can and cannot be deducted that will take pay below NMW. Clearer notes and guidance with examples are needed to ensure that employers stay compliant. Also, it makes the task of recovering overpayments and other necessary deductions from pay difficult. It would be useful to allow the employee to sign a written agreement for these deductions to be recovered and to be paid below the NMW/NLW for a short- term basis. Richard Blackwell: Where to start!? The guidance to comply with NMW/NLW regulations are clear enough, and it is
Samantha Mann MAAT,
MCIPPDip , CIPP senior policy and research officer
up in advance of rates being amended and can retain the ‘old’ rate unless updated accordingly. Simon Rice-Birchall: Yes, certainly, because more and more workers will be employed at or near the NMW. Who should take responsibility in organisations for ensuring NMW/NLW compliance? What power should this person have to effect changes to processes and procedures to ensure compliance and to authorise and make appropriate corrective payments in instances of the NMW/NLW being underpaid? Simon Parsons: As national minimum pay failure relates to criminal activity, then an employer needs to take responsibility at senior levels within the business. Payroll professionals can potentially assist; but equally services of friendly internal or external compliance audit and reviews are an option to consider. As failure to pay NMW/NLW is a criminal activity, the senior lead on minimum pay compliance must be able to expressly change business practice to resolve any potential breaches, and issue communications across the business. Processes for corrective payments must be put in place to ensure that they are made within appropriate timescales. Maria Hartley: Responsibility for compliance should lie with all parties; however, the main responsibility lies ultimately with the board of directors to enable the payroll department to have the resources (i.e. compliant software/reports and staff in the case of larger companies) to enable monthly checks of the data to ensure that all payments are compliant and those that are not are dealt with in a timely manner. Richard Blackwell: The board of our company take this corporate responsibility collectively, but delegate responsibility to the human resources (HR) director to rectify anything that is identified in our
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| Professional in Payroll, Pensions and Reward |
Issue 44 | October 2018
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