All employers must ensure that they are meeting their National Minimum Wage (NMW) obligations. NMW is the minimum hourly rate which employers are required to pay (almost) all their workers under the National Minimum Wage Act 1988.
The NMW rates change in October each year and there are no exemptions to paying the rates according to the size of your business. The rate which must be paid depends on the worker’s age and whether or not they are an apprentice. The NMW applies to all workers whether temporary, casual, agency, full or part-time. However, there are certain people who are not entitled to the NMW, for example: self-employed persons and volunteers.
New National Minimum Wage Rates
The increases in NMW rates (shown below) came into force on 1 October 2014 and apply to pay reference periods beginning on or after this date:
– £6.50 for workers 21 years and older
– £5.13 for workers 18-20 years
– £3.79 for workers 16-17 years
– £2.73 for apprentices under 19 or 19 years+ who are in the first year of apprenticeship.
Accommodation offset against the NMW – what’s included?
Where accommodation is provided by an employer to a worker, this may be taken into account when calculating the NMW (accommodation offset rule); this includes their rent, gas, electricity, furniture and laundry. From 1 October 2014 the offset rate has been increased to a maximum of £5.08 per day or £35.56 a week. If an employer charges more than the offset rate, the difference must be taken off the worker’s pay which counts for the minimum wage. Employers who use the accommodation offset rule need to be careful that they do not end up paying their workers any less than they should.
No other non-cash employee benefit (e.g. food, a company car or childcare vouchers) can count towards the minimum wage. Service charges, tips and gratuities can no longer make up your employees’ pay for NMW purposes.
If you are unsure whether you are meeting NMW obligations, it is recommended that you use the NMW calculator: https://www.gov.uk/am-i-getting-minimum-wage.
Record keeping, Fines and Name & Shame…
It is a criminal offence for employers not to pay their workers at least the NMW and for failing to keep proper or falsifying payment records. Employers are required to keep certain records of the hours worked by, and payments made to, their workers. These records must be kept for at least 3 years and without these records it may be presumed that such workers have not been paid the minimum wage.
The Government has taken a tough line on what it sees as “rogue” employers who do not pay the minimum wage. There is an increased maximum penalty of up to £20,000 which can apply to each underpaid worker as part of the government’s crackdown on this. The Government is now also publicly naming and shaming employers if they fail to pay workers NMW, in efforts to increase compliance.
This can be a complicated area of law and if in doubt it is recommended that you receive legal advice from the employment team at Stephens Scown.