National Minimum Wage and National Living Wage
What is the National Minimum Wage?
The minimum wage workers should get dependant upon their age. The NMW rates increased on 1 October 2016 and as such, employers are required to pay the following:
What is the National Living Wage?
The NLW wages was introduced by the Government on 1 April 2016. The NLW differs from the NMW in that it represents a premium added onto the NMW for all workers aged 25 and over. For workers aged 25 and over, the NLW is currently set at a rate of £7.20 an hour and from 6 April 2017 this will rise to £7.50.
It is estimated that the introduction of the NLW will increase the sectors pay bill by £1 billion a year every year for three years. Employers should not be deterred from adhering to their NLW and NMW obligations. Failure to pay the correct NMW and NLW leaves employers open to not only receiving penalties from HMRC, but exposed to reputational damage.
The Government has recently sent a clear message to employers that failures to pay the correct rate of the NMW and NLW will not go unpunished. Specifically, the Department for Business, Energy and Industrial Strategy (the “BEIS”) have published their largest ever list of NMW and NLW offenders (that is, those who fail to pay the correct rates). The list comprises of 359 employers who have collectively underpaid 15,513 workers a total of £994,685. The employers have been fined an estimated £800,000 as a result.
The BEIS revealed the hospitality industry was one of the worst offenders and the reasons cited for underpayment includes:
- Using tips to top up pay;
- Docking workers wages to pay for Christmas parties; and
- Making staff pay for their own uniforms out of their salary.
Employers need to recognise that implementing is not simply done by increasing pay and must ensure they have effective systems and procedures in operation to prevent small administrative errors causing underpayment. For example, employers should ensure that their payroll system recognises when an employee moves from one age category to the next, and in turn becomes entitled to the higher rate of pay.
For more information contact our employment team on 0345 070 6000.