The Chartered Institute of Payroll Professionals ……………………………………………………………Policy News Journal
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Calculating pay for National Minimum Wage purposes 8 March 2017
The recent naming of 359 businesses who failed to pay their employees the minimum wage has resulted in some CIPP member queries around the calculation of annual hours for salaried workers.
After the Department for Business, Energy & Industrial Strategy (BEIS) published the latest list of national minimum and living wage offenders, there was publicity about certain employers having been found to not be calculating pay correctly and therefore paying below the minimum wage. This prompted some members to contact our advisory service to double check their calculation method as reports were referring to the figure 52.17 for use when calculating an hourly rate for a salaried worker.
For clarity, HMRC has confirmed the following:
“Regulation 21(3) National Minimum Wage Regulations 2015 sets out
(3) The second condition is that the worker is entitled under their contract to be paid that salary or salary and performance bonus in respect of a number of hours in a year, whether those hours are specified in or ascertained in accordance with their contract (“the basic hours”).
In order to comply with this requirement, employers need to either specify the annual hours in the workers’ contracts or provide sufficient information in the contract to allow the annual hours to be ascertained for the full calendar year.
HMRC does not specify the use of a particular divisor: if an employer has a credible system for determining the annual hours, HMRC will use that when investigating potential NMW breaches.
The BEIS guidance Calculating the minimum wage provides information for employers at page 37.”
The relevant section of the NMW Manual can be found here .
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£10 million price tag on Tesco from minimum wage payroll error 14 March 2017
Helen Hargreaves sticks up for Payroll Professionals all round, in an interview on BBC Radio 5 Live.
During the implementation of a new payroll system, it was discovered that Tesco had inadvertently failed to pay the National Living Wage to around 140,000 former and current employees.
Shopworkers’ trade union Usdaw is working with Tesco to rectify the payroll issue. Usdaw National Officers Pauline Foulkes and Joanne McGuinness said:
“The issue relates to the operation of a number of voluntary benefits, including pensions, childcare vouchers and cycle to work, that the company offers via salary sacrifice schemes. This has resulted in pay after salary sacrifice not reaching the required National Living Wage levels for some staff.
We continue to work with the company to ensure all staff affected are informed and that their pay is corrected and reimbursed as a matter of urgency. For the majority of staff this is likely to be up to £40.
Our priority now is to agree measures with Tesco to ensure this doesn’t happen again. In the meantime we a providing our members with the support and advice they require.”
In February 2017 the Department for Business, Energy and Industrial Strategy named 359 businesses who underpaid 15,513 workers a total of £994,685 with employers in the hairdressing, hospitality and retail sectors the most prolific offenders.
The Chartered Institute of Payroll Professionals
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