Bryony Gibson, director of Bryony Gibson Consulting, shares some advice to help you ensure your business adheres to the new regulations.
On 1 April, the National Minimum Wage (NMW) increased and there are strong rumours that the North East will become the next regional enforcement target for HMRC.
Extended to domestic live-in workers and with employees aged 21 becoming entitled to the National Living Wage (previously 23), it means the minimum pay workers must receive depends, predominantly, upon their age:
21 years+ – £11.44
18 – 20 years – £8.60
Under 18 – £6.40
Apprentice – £6.40
As a sign of intent, the government recently named and shamed over 500 businesses for failing to pay the NMW. Highlighting major high-street brands, it was a message that nobody is exempt. It doesn’t matter about your size or whether a role is part-time, casual, agency, or trainee. By law, everyone must be paid the NMW for their time.
With beefed-up penalties as part of the crackdown, miscalculating employers face the prospect of a £20,000 fine, a financial penalty worth 200% of any underpayment, and being made to repay arrears dating back six years.
While their policy suggests the emphasis is cooperation and compliance, under the National Minimum Wage Act, criminal sanctions can be reserved for the small minority that are persistently non-compliant and refuse to cooperate.
Regional Wage Enforcement
In place from 2022, if HMRC intends to target the North East it is due to central data that suggests workers are likely to be paid below NMW or intelligence gathered, which can include complaints made by workers.
When pursuing a new area, typically HMRC floods the region to gather intelligence and identify businesses that require a ‘nudge’.
The first sign of being under review is to receive a letter asking you to check your compliance. With no actions or dates, it can easily be missed. If so, it will be followed by an offer to perform a free ‘health check’ of your NMW compliance. Failure to take up the offer will lead to a formal enquiry.
What do you need to do?
Broadly speaking, as an employer, you should try to undertake the following:
1. Conduct a review to assess the state of your NMW compliance.
2. Create a risk register of what is in place and identify the areas where further investigation is required.
3. Sample-check payment records to see if there are any periods where you could be at risk of underpayments.
4. Based on the data, build an action plan and a more robust and controlled environment (policies and working records) moving forward.
5. If you have discovered an error and underpaid a worker in the past six years, recalculate their pay and pay the shortfall. The most important thing is to ensure steps are taken to rectify any issues immediately.
Coinciding with the NMW increase, on 7 April, there was also a rise in the range of statutory payments.
It would pay to re-look at your familyfriendly statutory payments, including Maternity & Paternity Pay, Adoption Pay, Shared Parental Pay, Parental Bereavement Pay, and Sick Pay.
Changes to the NMW and statutory payments usually come into force each April, so keeping a legal checklist that you review annually will ensure you stay on top of obligations and don’t get caught out.
If targeted, remember that the HMRC’s initial calculations may apply incorrect assumptions without access to all your information. I suggest seeking professional advice throughout the process to ensure you are not unfairly reprimanded and your reputation as an employer is not unnecessarily put at risk.
By taking these simple proactive steps, you can avoid the risk of legal penalties, protect your reputation, and ensure fair treatment of your employees.