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COMPLIANCE
THE CIPP
2024
National minimum wage governance – whose job is it anyway?
The CIPP’s Annual Excellence Awards are the longest running, independent awards in the industry. They were established to recognise the outstanding contribution to the UK economy made by the payroll and pensions professions. The Awards celebrate the commitment and excellence of both individuals and organisations in their role of ensuring that people are paid.
Jeni Morris ACIPP, head of the national minimum wage (NMW) team, EY, investigates where ensuring compliance with NMW regulations should sit
M aintaining compliance with across numerous organisational functions including human resources (HR), payroll, operations and finance. However, a question that often arises surrounds who the chief steward of NMW governance should be. Who should shoulder the NMW regulations is a collective responsibility, which spans responsibility of ensuring all agreed-upon processes are faithfully adhered to, and who should interact with HM Revenue and Customs (HMRC) to easily demonstrate NMW compliance? Our recent survey of businesses highlighted a varied understanding of this role: l 70% said the payroll department was responsible l 26% believed this duty lay with HR l 2% thought this role sat within finance l 2% stated that the head of tax would be responsible. From our observations, in situations where an NMW investigation is initiated by HMRC, this role rapidly oscillates between different departments, commonly ending up under the jurisdiction of the head of tax. However, this frequently necessitates a hurried familiarisation with the intricacies of NMW rules and regulations. Pre-emptive assignment of NMW governance within an organisation could prevent uncertain outcomes. The reputational and financial repercussions of NMW rule contraventions, although unintentional, are perceptibly detrimental. This is evident from the recent list published by HMRC, which identified 524
employers for NMW violations, highlighting shortfalls of nearly £16 million affecting over 172,000 workers. Today, the scale of underpayment varies widely due to factors such as deductions, unpaid work time and incorrect apprentice rates. Over one third of the businesses fell foul of the rules by making deductions from wages for various reasons, including uniform costs, food, meal expenses, parking permits, training costs, salary sacrifice schemes and others. In addition, approximately 31% failed to pay for additional work time, including for overtime and for people working through their breaks. Employers often round off work time at hourly intervals, potentially causing a discrepancy. A widespread misperception is that businesses paying rates higher than the NMW are immune to NMW disputes. This myth is debunked in the educational bulletin attached to the most recent naming round. It identifies the top underpaying sector per HMRC statistics to be the ‘non-low pay sectors’. The non- low pay sectors frequently relate to those employees who we would refer to as salaried employees, and they often appear to be paid above the NMW rates. However, often, accurate time records aren’t kept for salaried employees, which may lead to unpaid additional working time. With a significant rise in NMW / national living wage rates from April 2024, it’s becoming more important than ever to ensure your business can fully demonstrate its NMW compliance across the whole workforce. n
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| Professional in Payroll, Pensions and Reward | April 2024 | Issue 99 22
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