Changes in low wage legislation



It is a legal requirement for employers to pay all of their workers at least the National Minimum Wage (NMW), as determined by their age. With new NMW rates coming into force on 1 October 2016, here’s a reminder of the penalties employers could face if they fail to pay correctly, and tips on how to avoid any issues.

The Government recently named and shamed nearly 200 employers for failing to pay their workers the National Minimum Wage – the full list can be viewed here

Since the start of the scheme in October 2013, the Government has publicly embarrassed nearly 700 employers, with arrears totalling more than £3.5 million. This latest round of disclosures accounts for nearly £500,000 of NMW arrears.

HMRC have the right to carry out a check at any time and not only do employers face being publicly named and shamed by the Government, there are also costly financial consequences of failing to pay workers their legal entitlement. Employees who believe they are being underpaid can make a claim to an employment tribunal or direct to HMRC.

If an employer is found to be underpaying workers, they will have to pay the arrears and face a potential fine of up to £20,000 for each worker. In serious cases, the employer may also be prosecuted.

If HMRC find a breach, the employer faces having their name published as an example of an employer who has failed to comply with the law, alongside the fines and potential prosecution.

The NMW details change every year when the rates are updated, so if you set your wages in line with the minimum wage it is important to observe the following:

  • Be alert to the new rates applicable each year. Breaches in the law can result in large fines. Ignorance is not a defence and unintentional breaches of the law are dealt with in the same way as intentional ones.
  • Be aware of the age of employees when they start employment. While age should not play a part in your recruitment decisions, knowing your employees age means you can check they are on the correct minimum wage. It is also important to keep track of birthdays as a reminder to increase pay when the employee moves up into the next banding.

The National Living Wage, introduced on 1 April 2016, is £7.20 an hour for workers aged 25 and older. From 1 October 2016 the rates for the NMW will rise as follows:

21-24 year olds – £6.95 per hour (increase of 3.7%)

18-20 year olds – £5.55 per hour (increase of 4.7%)

16-17 year olds – £4 per hour (increase of 3.4%)

£3.40 for apprentices under 19 or 19 or over who are in the first year of apprenticeship.

Castletons Accountants

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