A Guide to the National Minimum Wage Increase
Big news for employers and employees alike – the National Minimum Wage (NMW) is set to rise. At the start of October, the minimum rate of pay will increase by up to 4.7%. Yes, it’s a small amount and it should be easy to manage, but as we will explain, the change has a few banana skins that employers will want to avoid. Read on for our simple walkthrough of dealing with the minimum wage increase.
Knowing the difference
For clarification, the National Minimum Wage differs from the National Living Wage (NLW). The NLW is for people aged 25 and over, whereas people below 25 receive a lower minimum rate. The NMW has three age-based categories and one for apprentices. The increases for each category are listed below:
- Apprentices – £3.30 rising to £3.40
- 16 to 17 – £3.87 rising to £4.00
- 18 to 20 – £5.30 rising to £5.55
- 21 to 24 – £6.70 rising to £6.95
With three age-based categories – and the NLW coming in when workers turn 25 – it’s important you keep track of your employees’ birthdays. When an employee turns 16, 18, 21 and 25 they are immediately entitled to the next level of minimum wage. Stay on top of this and make sure you know their exact age and the date they become eligible for a higher wage.
Another area to consider is working hours. Some employers carry out routine bag searches on employees at the end of each working day. These searches can take longer because of waiting and queuing. It’s time that employees should be compensated for and so it needs to be done within their working hours, or considered when calculating their overtime. You should also check whether your employees’ break time is paid or unpaid as this can affect the hourly rate.
The cost of equipment or uniforms needs to be taken into account too. If an employee isn’t refunded for a £10 a week uniform rental, for instance, this could push their wage below the minimum. Anything which is essential to the job of the employee should be taken into account, but employees’ personal food expenses don’t affect the calculations.
HMRC can carry out minimum wage checks at any given time. Employees can also claim for checks through HMRC. If they find an underpayment they will make employers pay back any loss of earnings and could even charge a penalty of up to £20,000 per underpaid worker. Serious cases can lead to prosecution, but in any case businesses will be added to the government’s public ‘named and shamed’ list of companies who failed to pay the NMW. For more information on the changes, which take effect on October 1st, check out the official government guide to the NMW and NLW.
Don’t be caught out
In most cases, underpayments are a result of genuine mistakes. However, the consequences of failing to comply with NMW are serious, so it’s essential to keep on top of it.
UWM Accountants are a team of friendly, professional and experienced accountants. Our fully managed payroll services can save you time, money and a lot of stress. Whether your business is big or small, we’ll make sure all your employees are paid the right amount on time. Get in touch online or call us on 0113 231 0202 to see how we can help you.