On 9 March 2018 HMRC released the names of employers who have paid their staff less than the minimum wage. They release this report quarterly and it is surprising how many businesses are on this list each quarter. This time there are 179 businesses who have underpaid their employees between £100 and £133,000. They don't report on underpayments less than £100 although that doesn't mean they don't take action.
The number of employees affected in each business varies - for example 2,630 workers were underpaid by £133,000 which equates to just £50 each, whilst another business underpaid 2 employees by almost £42,000. The underpayments could cover a significant period of time or just a few months.
There could be a number of reasons why employers did not pay the minimum wage and many employers may not have consciously underpaid their staff. Legislation surrounding employing staff and paying them can be complex as all sorts of things can affect an employee's pay.
So not only do you have to make sure that you take all situations into account when preparing the pay for your staff, you have to keep up with changes in legislation and ensure you make deductions correctly and only those that are allowable.
The National Minimum Wage changes every year in April, so all employers must be prepared for this change and plan for the new rises. However they should also be aware of changes during the year. An employee's birthday may move them to the next National Minimum Wage bracket. It could also mean that they become eligible for auto enrolment too. It can be difficult to keep track of but HMRC would probably not see this as an acceptable excuse.
We process payroll for numerous businesses because it is one less thing for busy business owners to think about and manage. We keep up to date with legislation as well as minimum wage changes and we advise all relevant employers well in advance of any change they need to make to the pay of specific individuals in their employment.
The other significant change we ensure our employers are aware of is when apprentices are coming to the end of their first year of apprenticeship. Apprentices in their first year can be paid a minimum wage of £3.70/hour in 2018-19 (it was £3.50) which is pretty low but enables businesses to support someone in training. However as soon as they have completed their first year of apprenticeship their pay has to increase to the national minimum wage rate for their age. For an older apprentice (25+) this would be £7.83 for 2018-19. The business owner has to work out whether they can sustain this wage whilst they are training someone for another 1-3 years. Of course it depends on the industry, the ability of the apprentice and how the business will develop but the increase has to be planned for in advance or a decision made not to continue after the first year as the additional costs of Employers NIC and pension contributions could push that hourly rate to £9 which is a very large jump from £3.70.
Employers may have been identified as not paying the minimum wage because they didn't consider that the people working with them were employees. Volunteers or those on work experience are generally not paid except for reimbursement of expenses, however if there is any intention of a job at the end of the work experience or a round sum amount paid for expenses, HMRC consider these individuals to be employees and not volunteers or on work experience. Read more about this on HMRC website to ensure you don't get caught out by this.
Whilst we can support our employers with updates to legislation and advise on situations specific to them at the end of the day the responsibility lies with the employer to pay their employee correctly.
Contact us if you want to make sure your payroll is being processed correctly and your staff are being paid appropriately for their age. Its almost the start of a new financial year for payroll so a perfect time to make that change and breathe a sigh of relief!