National Minimum Wage – It’s not child’s play
To add to that, the Department of Business & Trade, in June 2023, named and penalised 12 early years and pre-primary establishments (almost 6% of the 202 employers named) for failing to pay at least the National Minimum Wage. Surely, additional investment in a sector that is already seen as being overworked, typically poorly paid and suffering from closures is welcomed, not only to increase the availability of accessible childcare places and the quality of service provided, but more importantly, to reward and retain hard-working and loyal employees so that any risk of minimum wage failing is averted?
Compliance with the NMW legislation does not discriminate between industry sectors – if you’re an employer, have employees and/or workers, then there is a legal requirement to pay these individuals what they are entitled to. But how does a business ensure that their NMW processes are compliant? Non-compliant employers are at risk of financial penalties of 200% of any underpayment calculated and any associated reputational damage from being “named and shamed” if HMRC were to come knocking on the door.
Calculating the minimum wage paid isn’t as straight forward as some may think. The rules are complex and mistakes can be easy to make. Here are some common risk areas to consider when reviewing your current compliance controls:
Working time All time worked should be factored into the total amount of working time to be paid for including: - Arriving early to set up/finishing late to close - Mandatory training (at the workplace, off-site, at home) - Business travel time (such as travel to work at another site – but not home to work commute) | Pay components Only include those pay elements that count as pay for NMW purposes, e.g., basic pay, overtime at basic rate, performance bonus. Allowances, such as first aid, H&S, location allowance and premium rates for working additional hours do not count towards ‘NMW pay’. Including pay elements that do not count as ‘NMW pay’ will result in the wrong hourly rate being calculated. |
Deductions Many childcare providers allow their employees’ child(ren) to attend the nursery and deduct the fees payable directly from pay – even where an employee has agreed to this deduction, the amount taken via payroll will reduce the employees NMW rate and could result in a breach occurring, especially if their pay is close to the NMW rate. Other deductions that reduce NMW pay include: - Administration fees, e.g., £1 for processing an attachment of earnings order or to process a DBS check. - Mandatory training costs - Charges for PPE and any specialist equipment | Expenses Many employers require customer facing employees to adhere to a dress code, such as a wearing a specific colour and/or type of footwear and items of clothing, such as black shoes and black trousers. If the items are not provided by the employer, then any cost incurred by the employee to buy and/or replace specifically requested workwear, that is not reimbursed, will be considered as a reduction to pay and could reduce an employee’s pay rate below the applicable NMW rate payable as and when the items are purchased. |
At Mazars, we have a National Minimum Wage Team, led by an ex-HMRC NMW Investigator who has a wealth of expertise and knowledge to help guide you through any concerns or queries you may have in relation to your NMW strategy.
HMRC’s on-going enforcement activity is currently focussing on geographical areas such as Glasgow, Birmingham, Yorkshire and Belfast, though other areas may be targeted in the near future. If you’re not sure where to start in checking whether your processes are up to scratch, why not contact us and ask to complete our NMW Assessor Tool. On completion, you will be provided with a risk score and a high-level risk report, which is a great starting point to help identify any gaps in your compliance process that may need further consideration. The report is followed up by a complimentary 30-minute telephone call to discuss any follow-up support that may be required.
Please don't hesitate to get in touch if you would to like discuss further any points raised in the article.
References
The Low Pay Commission (LPC) estimates that around 1.6 million workers were being paid at or below the minimum wage in April 2022 – that’s 5% of all UK workers. However, with the minimum wage rates increasing and pay differentials reducing, combined with the complexities of the minimum wage legislation, it’s not just those low paying roles at risk anymore.
202 employers have been found in breach of NMW and have been named in the Department of Business & Trade’s National Minimum Wage Naming Scheme.
01/06/2023. Mazars are aware that HMRC are currently targeting a number of employers on NMW compliance processes.
26/05/2023. What is a P11D and when is the deadline? A P11D is a form submitted to HMRC where employers report any taxable benefits and expenses provided to their employees or directors that are not included within their salary. The deadline for P11D reporting for the 2022/23 tax year is 6 July 2023.
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