National Minimum Wage – Do you know your obligations as an employer?
In December 2017, the UK government named 260 companies owing a total of £1.7 million to their workers for failure to pay the minimum wage, including retail giants such as Primark and Sports Direct.
Whilst most employers may think they are aware of their obligations under the National Minimum Wage regulations, complying is not as simple as setting an hourly rate above the minimum. In the case of Primark for instance, the failure to pay minimum wage resulted from the company deducting the price of employees’ uniforms from their wages. It is essential for companies to know their obligations under the regulations, and what is at stake if they fail to comply.
The national living wage is currently £7.50 per hour (going up to £7.83 on 1 April 2018), and is the minimum wage applying to all workers aged 25 and over. There are different rates in force for younger workers. Employers must ensure they pay the minimum wage on average for the time worked during a pay reference period (which is one week if workers are paid weekly, one month if paid monthly, etc).
Equally important is the obligation to keep records. HMRC can ask to see payment records at any time, so it is key to have these to hand. Employers’ records must, broadly speaking, show the following (non-exhaustive list):
Information about employees’ hours or work and pay;
Any information that may affect employees’ pay, such as absences, the provision of accommodation or business travel; and
Itemised pay statements given to employees showing gross and net amounts, and any deductions made.
Whilst the National Minimum Wage regulations require employers to keep these records for 3 years, it is advisable to keep these for 6 years to cover the limitation period during which time a worker must bring any contractual claim for failure to pay the minimum wage if he so wishes.
In case of non-compliance by employers, HMRC (which enforces the national minimum wage) can impose civil penalties (up to 200% of the total underpayment, to a maximum of £20,000), and has been known to ‘name and shame’ those who have fallen short in the past. If that is not enough of an incentive to comply, HMRC can also instigate criminal proceedings against an employer for failure to comply with national minimum wage obligations, including record-keeping.
If you are concerned about the arrangements your business has in place, or if you have any other questions about national minimum wage, please contact our Employment team.
The material contained in this guide is provided for general purposes only and does not constitute legal or other professional advice. Appropriate legal advice should be sought for specific circumstances and before action is taken.