COMPLIANCE
T he minimum wage is one of the cornerstones of the UK’s labour market policy. The DBT owns the policy and sets the annual rates for the national living wage (NLW) and NMW, and HM Revenue and Customs (HMRC) enforces the rules. Common mistakes The vast majority of employers do the right thing, complying with the regulations, but we know this isn’t always the case, and the government takes enforcing the minimum wage seriously. In 2021/22, HMRC concluded over 2,800 minimum wage investigations and returned more than £16.3 million in arrears to over 120,000 workers (see here: https://ow.ly/ pm3z50OLCWa). As well as having to pay
these arrears, flouting minimum wage legislation can lead to an additional penalty – of up to 200% of the arrears – being issued, and carries the risk of being publicly named, resulting in reputational damage. While some of these cases involve deliberate underpayments, it’s far more common for these underpayments to come about inadvertently, often due to employers not taking the time to familiarise themselves with the detailed regulations. Payroll operatives can have a crucial role to play in ensuring their employers are compliant with the law, by keeping accurate and up to date records and providing advice to their colleagues. We’ll cover a few of the most common forms of accidental underpayment, which employers should seek to avoid.
Underpaying the minimum wage
The correct rate Currently, there are five different minimum wage rates, depending on the age of a worker, and whether they’re an apprentice:
Tony Gordon, policy advisor, national minimum wage (NMW) at the Department for Business and Trade (DBT), discusses some of the key risk areas when it comes to ensuring employees are paid in line with NMW regulations
NMW 21 to 22
NMW 18 to 20
NMW Under 18
Apprentice NMW
NLW 23 and over
From April 2023
£10.42 £10.18 £7.49 £5.28 £5.28
entitled to the higher, age-related NMW rate – in this case, £10.18 an hour. Additionally, it’s crucial to remember apprentices must be paid for all their working time, including the time they’re required to spend studying and training as part of their apprenticeship. “The apprentice rate only applies for apprentices aged under 19, or those who are in the first year of their apprenticeship”
It’s very important to ensure the correct rate of minimum wage is paid to every worker. Employers should familiarise themselves with the rates, which typically increase every April (with the new rates usually announced around six months beforehand). Employers should also make themselves aware of workers’ upcoming birthdays, as the minimum wage rate they’re entitled to increases when they turn 18, 21 and 23. In these instances, the higher rate applies from the following pay reference period. Apprentice rate The lower rate the apprentice NMW is set at takes account of certain, related costs for employers and the benefits for the young people involved. However, it’s important the rate is applied correctly. Firstly, the apprentice rate only applies for apprentices aged under 19, or those who are in the first year of their apprenticeship. To give one example, if a 22-year-old entered the second year of their apprenticeship, the apprentice rate would no longer apply, and they would be
Unpaid working time Put simply, employers must pay their workers at least the
NLW, or the relevant NMW, for all the hours they work in each pay reference
| Professional in Payroll, Pensions and Reward | July - August 2023 | Issue 92 24
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