News & Events
The latest National Minimum Wage breaches: Common pitfalls to avoid
28th March 2024
The Department for Business and Trade (DBT) recently unveiled its 20th instalment of companies that have fallen foul of National Minimum Wage (NMW) regulations. Over 524 businesses were named, impacting 172,199 workers. This serves as a stark reminder of the consequences of non-compliance of National Minimum Wage (NMW) requirements. Rowleys’ Payroll Manager, Rebecca Gotch, shares more about the latest data and some of the common pitfalls.
Organisations who fail compliance checks by HM Revenue and Customs (HMRC) risk inclusion on the list. As well as significant fines for not complying with NMW regulation, there is also the damage to a company’s reputation to consider.
The latest DBT data highlights some key reasons for underpayment, some of which, could easily catch employers out, these include:
Payment deductions below NMW levels: 183 employers were on the list for making deductions that reduced pay below NMW levels. These deductions included various expenses such as food, salary sacrifice, training costs, or uniforms.
Unpaid working time: 160 employers faced scrutiny for failing to compensate employees for all working hours, including additional hours worked, travel time, or mandatory training sessions.
Incorrect payment rates for apprentices: 82 businesses stumbled into non-compliance due to timing issues related to apprenticeship pay rates, for example employees being incorrectly classed as apprentices even after they’ve finished their programme.
Failure to update wage rates: 55 employers neglected to apply the updated NMW rates, which are periodically revised.
Accommodations offset errors: 34 businesses failed to correctly offset accommodation charges against wages, resulting in underpayment.
Misclassification of worker types: 29 employers incorrectly categorised their workers, leading to incorrect wage calculations.
Worker status errors: 12 employers were treating workers as self-employed or unpaid interns when they should have been classified as employees.
There were also 149 employers who fell into the “other” category, suggesting miscellaneous reasons not fitting into specific classifications.
While some cases involve what appear to be substantial underpayments, when divided among affected workers, the impact may be relatively minor. For instance, Game Retail Limited underpaid workers by £58,475.54, averaging just £11.74 per affected worker over a six-year period. Conversely, Mine and Yours Ltd underpaid £60,665 to 24 workers, averaging £2,527.73 per worker over two months, possibly indicating complete non-payment.
The reasons for non-compliance highlight the need for employers to be extremely careful in ensure that they are meeting the current NMW requirements, as it is easy to get caught out.
Ensuring accurate wage calculations, timely updates of NMW rates, proper classification of workers, and thorough documentation of working hours are all essential steps in ensuring compliance. Regular audits and proactive measures can help companies steer clear of the NMW enforcement radar, safeguarding their reputation and financial well-being.
It is always advisable for employers to seek professional advice to ensure they remain up-to-date with any changes to the NMW regulations.
For more information on NMW, visit the HMRC website.
Our CIPP-qualified payroll experts manage all aspects of payroll ensuring that NMW is calculated correctly. We work with hundreds of clients of different sizes To find out more about our payroll services, please contact Rebecca Gotch, either by email: rebecca.gotch@rowleys.biz or call: 0116 282 7000.