Payroll Pain Points – NMW Trap Doors and Safety Nets
Westcotts and Mogers Drewett collaborated on this mini-series of podcasts to answer some of the questions you may have concerning a range of employment related matters and to give to different perspectives, namely from a payroll specialist, Liz Marker and a HR specialist, Lucy Cotterell.
We have been covering a range of topics in this series and today will be discussing the latest ‘name and shame’ of employers who failed to meet the National Minimum Wage requirements over the last tax year and how to avoid “trap doors” of NMW non compliance.
We look at what this may mean for businesses in the wider context of attracting, recruiting and retaining employees.
Lucy Cotterell – Human Resources Consultant, Mogers Drewett
20 years’ experience in HR, worked at Director level for many years for a Further Education College. Experience includes responsibility for HR across all functions including Resourcing, Relations, Reward and development at both operational and strategic level.
Lucy provides practical solutions to people related issues and helps with ensuring HR is aligned to organisational objectives.
Her approach is consultative, practical and balanced between meeting organisational and individual needs.
Liz Marker MAAT MCIPP – Payroll Manager – Westcotts
Liz has worked for Parkhurst Hill and Westcotts for 13 years running our payroll department and uses her experience of working within the business sector to help clients and to create efficient ways to process payroll.
“I helped run a construction business outside of Manchester so I have first-hand experience of running a small business and understand the problems our client’s experience.”
National Minimum Wage/National Living Wage – what is it?
- There are different rates for those below these ages and another rate for Apprentices.
What is the impact for employers?
- Difficulties in attracting and retaining workers
- Reputational impact
- Fines from HMRC as well as the ‘naming and shaming’ publicly for 12 months
Who gets it?
- Anyone classed as a worker and at least school leaving age.
- It doesn’t matter how small the employer is, they still have to pay the correct minimum wage for all eligible workers.
What is included in minimum wage calculation?
- Income Tax and NIC
- Wage advances or loans
- repayment of wage advances or loans
- repayment of overpaid wages
- things the worker paid for that are not needed for the job or paid for voluntarily, such as meals accommodation provided by an employer above the offset rate (£9.10 a day or £63.70 a week)
- penalty charges for a worker’s misconduct
What is not included?
- payments that should not be included for the employer’s own use or benefit, for example if the employer has paid for travel to work.
- things the worker bought for the job and is not refunded for, such as tools, uniform, safety equipment.
- tips, service charges and cover charges
- extra pay for working unsocial hours on a shift.
What can employers do?
- It is a criminal offence for employers to not pay someone the National Minimum Wage or National Living Wage, or to fake payment records.
- If an employer discovers that they’ve paid a worker below the correct minimum wage, they must pay arrears immediately.
- To check, employers can use the gov.uk calculator.
If HMRC identifies that employer hasn’t paid the correct rate any arrears would need to be paid back immediately and there is also a fine, along with being named by the Government, as we have seen.
Employers are responsible for keeping records to prove that they have paid the minimum wage and must keep these records for 6 years (those companies listed refer to investigations made as far back as 2015).