This article was written by Kudzai Kamhiriri – Compliance Officer at FCSA
Read the original article on the FCSA website here.
The National Minimum Wage (NMW) and the National Living Wage (NLW) are the minimum legal amounts employers must pay their workers. These regulations are essential in employment law, ensuring that workers receive a fair baseline pay for their efforts. Compliance with the NMW and NLW is not only a legal obligation but also crucial for fostering a fair and motivated workforce. Here are some essential aspects and top tips for employers regarding NMW and NLW.
What is the National Minimum Wage?
The NMW is the minimum pay per hour that workers are entitled to by law. It varies depending on the worker’s age and whether they are an apprentice. The rates for the NMW (for those at least school-leaving age) and NLW (for those aged 21 and over) are as follows:
Employers must ensure their pay practices align with these rates to avoid underpaying workers and facing legal repercussions. It is illegal for an employer to pay less than the NMW or NLW.
Key Considerations for Employers
1. Regular Review of Rates
- The NMW rates are updated annually in April. Employers should review and adjust wages accordingly to ensure compliance.
- Stay informed about upcoming changes through official government channels or employment law advisors.
2. Accurate Record Keeping
- Employers are legally required to keep sufficient records to show that they are meeting their NMW obligations. These records must be retained for a minimum of 6 years.
- The type of records that may be relevant include PAYE and/or NI records, timesheets, contracts of employment, and payroll records. For more information on record-keeping, follow – https://www.gov.uk/hmrc-internal-manuals/national-minimum-wage-manual/nmwm12020
3. Deductions and payments from workers
- Deductions an employer makes from a worker’s pay will always reduce National Minimum Wage pay if they are:
-
- In respect of a worker’s expenditure in connection with the employment, or
- Made for the employer’s own use and benefit and are not a liability owed by the worker and paid on his behalf to a third party.
- Ensure that all elements of pay are considered, including overtime, bonuses, and deductions. For more information on deductions, follow – NMWM11020 – Deductions and payments from workers: deductions: general approach – HMRC internal manual – GOV.UK (www.gov.uk)
4. Fair Treatment of Apprentices
- Apprentices are entitled to a specific minimum wage rate. Once they turn 19 and have completed the first year of their apprenticeship, they are entitled to the NMW rate for their age group.
- Regularly review apprentices’ contracts and wages to ensure compliance as they progress.
5. Clarity in Contracts and Communication
- Clearly outline pay rates and conditions in employment contracts. Ensure employees understand their pay structure, including how the NMW applies to them.
- Regular communication helps prevent misunderstandings and fosters a transparent work environment.
6. Handling Disputes and Complaints
- Establish a clear process for handling wage-related disputes and complaints.
- Encourage employees to voice concerns without fear of retaliation.
- Promptly address any issues raised to maintain trust and compliance. Resolve any backdated non-payment of the minimum wage, even if the employee no longer works for you.
Who gets the minimum wage?
People classed as ‘workers’ must be at least school leaving age to get the National Minimum Wage. They must be 21 or over to get the National Living Wage.
Workers are also entitled to the correct minimum wage if they’re:
- Part-time
- Casual labourers, for example, someone hired for one day
- Agency workers
- Workers and homeworkers paid by the number of items they make
- Apprentices
- Trainees, workers on probation
- Disabled workers
- Agricultural workers
- Foreign workers
- Seafarers
- Offshore workers
- Non-family members living in the employer’s home who share in the work and leisure activities and are treated as one of the family, for example, au pairs
Top Tips for Employers
1. Stay Updated
– Regularly check for updates on NMW rates and related legislation.
2. Training and Awareness
– Train managers and payroll staff on NMW compliance. Awareness at all levels ensures that everyone understands the importance of adhering to legal pay standards.
3. Conduct Internal Audits
– Periodically review payroll processes and employee wages to ensure ongoing compliance. Internal audits can catch discrepancies before they become legal issues.
4. Utilize Technology
– Use payroll software that automatically updates to reflect changes in NMW rates. Technology can reduce the risk of human error and streamline compliance.
5. Engage with Employees
– Foster an open dialogue with employees about their wages and working conditions. Engaged employees are more likely to report issues early, allowing for swift resolution.
Conclusion
Compliance with the National Minimum Wage is fundamental to ethical business practices and legal obligations. By staying informed, maintaining accurate records, and fostering transparent communication, employers can ensure they not only comply with NMW regulations but also support a fair and motivated workforce.
Helpful Links
– HMRC Email Updates and Webinars for National Minimum Wage https://www.gov.uk/guidance/hmrc-email-updates-and-webinars-for-national-minimum-wage
– National Minimum Wage and National Living Wage rates
https://www.gov.uk/national-minimum-wage-rates
– National Minimum Wage Manual – HMRC internal manual
https://www.gov.uk/hmrc-internal-manuals/national-minimum-wage-manual
– If an employer pays less – National Minimum Wage -Acas
