The Chartered Institute of Payroll Professionals ……………………………………………………………Policy News Journal
HMRC reiterated that an employer cannot make a deduction which reduces the pay below NMW rates. When this happens, the employer must pay the arrears to the worker, which is subject to tax and NICs, as with any arrears of pay. The legislation is clear in this matter and this is reflected in guidance for employers which states in this respect:
“You cannot make any deduction or take a payment that reduces a worker’s pay below national minimum wage rates, even if you have their permission to do so”.
The Policy team went back to HMRC with the concern that the £1 deduction is taken from net pay, after the deduction of tax and National Insurance so does not reduce the gross element for NMW purposes, so why is the deduction not permitted? We also questioned the “employers own use and benefit” and argued that the employer has had the duty to process AEOs imposed on them, it is not employer choice to provide the service on behalf of the courts etc. but merely a vehicle to deduct and pay over amounts on behalf of these organisations. The £1 deduction is not an employer benefit but recompense for the employer and in some cases the employer will employ resource to cope with such an admin duty and the £1 deduction does not come close to funding that resource. For legislation to be written in such a way to prevent the deduction does appear to be unfair. At this point we respectfully requested again that consideration be provided to review Regulation 32(1) (b) of the NMW Regulations 1999 in relation to the £1 deduction for AEOs. We also requested provision of employer guidance that reiterates and clarifies the current rules as they stand and to give consideration to the inclusion of this guidance within the HM Courts and Tribunal Services (HMCS) Handbook for operation of AEOs.
We were then informed that BIS would be considering the NMW regulations as part of other employment law reviews and would consider the points we raised in relation to Regulation 32(1) (b) as part of this work.
It may surprise readers to know that this review did not come to fruition. This has been raised again recently with HMRC and BEIS (formerly BIS) and their position has not changed:
“The £1 deduction for administration charges does have the effect of reducing pay for National Minimum Wage purposes. NMW Regulations 2015, Regulations 12(1) & 12(2)(e) (formerly NMW Regulations 1999, Regulations 32(1)(b), 34(1)(c) and 35(e) specifically cover deductions from workers.”
This is covered in the NMW Manual .
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National Minimum Wage (Workplace Internships) Bill 7 November 2016
A Bill has received its Second reading in Parliament which will require employers to pay workplace internships the National Minimum Wage (NMW).
The National Minimum Wage (Workplace Internships) Bill will require the Secretary of State to apply the provisions of the National Minimum Wage Act 1998 to workplace internships; and for connected purposes.
Geographical extent – this regulation, when enacted, will extend to all four nations of the UK.
This Bill started its second reading debate on Friday 4 November 2016 and the debate has now been adjourned to Friday 24 February 2017.
An employer is not liable for Employers’ National Insurance contributions for an intern undertaking a workplace internship of less than 12 months but ‘may’ meet Employers’ NICs for an intern undertaking a workplace internship of less than 12 months.
The provisions of the NMW Act 1998 shall not apply if:
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