National Minimum Wage Compliance for Employers

As an employer, having a good understanding of the National Minimum Wage (NMW) and the National Living Wage (NLW) is essential. You are legally required to pay your employees the correct wage they qualify for; failure to do so will result in a substantial fine or even a criminal conviction. The NMW and NLW are two separate terms, so it is crucial that you are aware of the differences between the two. There are different rates of pay depending upon the age of the employee in question.

Here at Analysis Legal, we understand that some employers may have trouble navigating the NMW and NLW to ensure compliance with the law. Our specialist team of employment solicitors have the knowledge and experience to aid you and your business with numerous employment matters.

Please browse our website or call us today to learn more about our employment law services. Our team will happily answer your questions and guide you towards the best solution for your business.

What is the National Minimum Wage?

The NMW is the minimum hourly rate employees are legally entitled to. Under the National Minimum Wage Act 1998, the law requires all businesses, regardless of size, to pay fair and legal wages to all workers. Every year in April, the pay rate for the NMW changes to reflect the current cost of living.

Workers of at least compulsory school leaving age (16 years old), or apprentices, are legally entitled to NMW whether full-time or part-time, doing essential training, or working in a small or ‘start-up’ business.

NMW must also be paid to the following workers:

• Agency staff
• Agricultural workers
• Apprentices
• Casual labourers
• Casual workers
• Employees on probation
• Foreign workers
• Home workers
• Offshore workers if they “ordinarily work” in the UK
• Seafarers
• Workers on commission
• Workers paid by piece
• Zero-hours workers

There are some exceptions to the NMW legislation, including:

• Those who are self-employed by choice
• Those who volunteer by choice
• Those in the armed forces
• Those who are work shadowing
• Those on a work placement as part of a course
• Those under school leaving age
• Those in a company director position

If you are unsure whether a worker is entitled to receive the NMW, our specialist employment solicitors are on hand to help. We can assess the criteria and assist you in determining how much an employee should receive in line with current legislation.

Enforcement for Underpayment and Common Pitfalls

HMRC can investigate any concerns raised regarding an employer’s failure to comply with National Minimum Wage requirements. If HMRC finds that an employer has not paid the legal minimum wage, they may issue a Notice of Underpayment; they can also “name and shame” an employer; or seek recovery of any underpayment through the tribunals or civil courts.  In some cases, they can pursue a criminal prosecution.  Individuals who have been underpaid can also bring an unlawful deduction from wages and/or breach of contract claim before an employment tribunal.

Some common National Minimum Wage pitfalls to be aware of include:

• Not paying for all hours worked – It is essential that accurate time records are kept to ensure that employees receive payment for every hour worked, including, where relevant, any time spent carrying out work before or after their usual working hours. Any pay relating to expenses e.g. for travel (except getting to and from work)  must not count towards the national minimum wage.
• Deducting employee expenses – Some employers charge their staff for expenses such as uniforms and equipment. However, you cannot use this as a reason to pay workers less than the NMW rate.
• Including service charges, tips and gratuities – Service charges are often added in the hospitality industry and are generally shared out amongst all staff. However, service charges, together with tips and gratuities, must not count towards a worker’s pay.
• Deducting from benefits in kind – Benefits offered by a business, such as company vehicles, medical insurance, free lunches and childcare vouchers, must not be calculated into a worker’s pay.