Are you comfortable with your National Minimum Wage (NMW) compliance?

Organisations who neglect to follow National Minimum Wage (NMW) compliance can be left liable to costly ramifications, both financially and reputationally.

Sourcing and recruiting the right talent to ensure organisations continue to run smoothly and grow is proving difficult at present, which means that employers are relying more on their existing workforce to plug those gaps and keep services running. A recent study undertaken by the Royal College of Nursing estimated that “nurses are working the equivalent of one day a week for nothing”.: “Extra work with no extra pay depresses the hourly rate, creating potential problems for compliance with NMW.  This isn’t just applicable to the NHS/healthcare sector. We are aware that HMRC’s NMW Enforcement team are actively investigating other sectors such as retail, leisure and hospitality, call centres, childcare nurseries, domiciliary care, and food processing to name a few. 

Of course, the actual impact of working additional “unpaid” time depends on an employee’s worker categorisation for NMW purposes, which is most commonly either salaried or paid hourly (timed work):

Salaried – if there is no contractual entitlement to additional remuneration then any extra time worked accumulates throughout the employee’s calculation year and needs to be considered at their year-end to check whether those extra hours (if not recouped under a flexi or time off in lieu arrangement) would reduce their month 12 salary payment to below their NMW entitlement.

Paid hourly – all time actually worked during the pay period needs to be paid for at the applicable NMW rate (at least) or in the following pay period.  Working just an extra 30 unpaid minutes a day could lead to an employee, paid at the current rate of £9.50 per hour, missing out on pay of £95 per month (based on a 5-day week). This lost pay will increase further from April 2023, when the National Living Wage goes from £9.50 to £10.42 per hour (a c. 9.7% increase in pay).

Organisations found to be in breach of the NMW requirements will be liable to pay arrears to current and former employees involved for up to a six-year period, face fines of 200% of the amount underpaid and then be named in the media. 

Some key risks areas to therefore considered when reviewing your checks and controls are:

Working time – has all the time worked (whether subject to overtime payment or not) been relayed to payroll? For example:

  • Shift handovers
  • Uniform changes/hygiene procedures
  • Security checks
  • Mandatory training
  • On-call time
  • Travel expenses/allowances
  • Pre-shift preparation
  • Post-shift clearing down

Deductions from pay – are payroll checks set up to flag payroll deductions that would reduce NMW pay, such as savings clubs, social club subscriptions, use of on-site facilities such as car parking, child-care and even a deduction or charge for accommodation where it is provided to employees.

Uniform/PPE – where there is a requirement or an expectation for employees to provide uniform items without reimbursement (e.g., to wear a specific type or colour of clothing and footwear) the cost incurred will reduce NMW pay.

Salary sacrifice arrangements – Employees having multiple arrangements in place, or making large, one-off additional contributions, can often lead to breaches if sufficient checks are not in place each pay period.

Volunteers – use of volunteers to plug any labour gaps needs careful consideration, especially if they receive a monetary payment for expenses, to make sure the arrangement is complying with NMW Regulations.

Get in touch

Mazars can provide full specialist support regarding NMW compliance within your organisation to help you understand how the key risk areas may impact your organisation. 

If you have any queries or would like to chat through NMW compliance in general, please contact your usual Mazars contact or complete the enquiry form below.

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