Hot Topic - National Minimum Wage

National Minimum Wage

The rates of pay set by the National Living Wage (NLW) and National Minimum Wage (NMW) increased on 1 April 2022, but this is no laughing matter for employers. Those employers that flout the NMW laws now risk more than just being fined and forced to repay underpayments. HMRC is now naming, shaming and, in some cases, holding these companies up to ridicule. Here, we take a look at the new rates and what happens when employers do not comply.

The NLW and the NMW

Anybody working-aged 23 or over and not in the first year of an apprenticeship is legally entitled to the NLW.

Despite its name, this rate is essentially an NMW for the over 22s. The government is committed to increasing this every year.

The NLW rate changes every April, while the NMW rates have traditionally been revised in October. However, since April 2017 the NMW and NLW cycles have been aligned so that both rates are amended in April each year. Employers will need to make sure they are paying their staff correctly as the NLW will be enforced as strongly as the NMW.

The table below shows the NMW and NLW rates applying from 1 April 2022:

*Under 19, or 19 and over in the first year of their apprenticeship

Breaching NMW laws

During the 2020/21 tax year the number of workers HMRC helped to reclaim lost earnings rose to over 155,000 across the UK. HMRC recovered more than ￡16 million in pay that was owed to them and also issued more than ￡14 million in penalties. Although not all NMW underpayments are intentional, it has always been the responsibility of all employers to abide by the law.

Naming and shaming

Last year HMRC took the step of ‘naming and shaming’ 191 employers that had broken NMW laws between 2011 and 2018.

Following investigations by HMRC, the named firms had to repay ￡2.1 million to over 34,000 workers and were fined an additional ￡3.2 million.

The employers named by the government fell foul of the following NMW laws:

• 47% wrongly deducted pay from workers’ wages, including for uniforms and expenses
• 30% failed to pay workers for all the time they had worked, such as when they worked overtime
• 19% paid the incorrect apprenticeship rate.

Poor excuses

In addition to naming and shaming offenders, HMRC revealed has some of the most ‘absurd’ excuses given by employers for not paying their employees the NMW.

HMRC’s top five ‘ridiculous’ excuses for flouting the law are:

1. ‘She does not deserve the NMW because she only makes the tea and sweeps the floors.’
2. ‘The employee was not a good worker, so I did not think they deserved to be paid the NMW.’
3. ‘My accountant and I speak a different language – he does not understand me, and that is why he does not pay my workers the correct wages.’
4. ‘My employee is still learning so they are not entitled to the NMW.’
5. ‘It is part of UK culture not to pay young workers for the first three months as they have to prove their ‘worth’ first.’

***************************************************************

Sansons are here to help support your business. For advice on your Tax, Self-Assessment or Accountancy support, our team of experts are on hand to help.

Visit our?website?or email?[email protected]