National Minimum Wage: Are You Compliant or Just Paying Above the Rate?
Many employers assume that if they pay their staff an hourly rate above the National Minimum Wage (NMW), they are automatically compliant.
Unfortunately, it isn't always that simple.
HMRC is currently writing to employers across the UK, reminding them to review their pay arrangements and warning that workers can still be underpaid even when their hourly rate appears to exceed the legal minimum.
Over the years, we've seen many businesses unintentionally fall foul of the rules. In most cases, there is no deliberate wrongdoing. The problem is that National Minimum Wage legislation is far more complex than many people realise.
Common Mistakes Employers Make
Some of the most frequent issues include:
• Requiring employees to buy uniforms, tools or equipment need for their role, that effectively reduce their pay below the minimum wage.
• Making deductions for items connected with employment.
• Failing to pay for all hours worked.
• Not paying employees for mandatory training.
• Incorrectly paying apprentices.
Are You Paying For All Time Worked?
One of the biggest areas of risk is unpaid working time.
For example:
• An employee arrives early to prepare for opening.
• Staff completing mandatory online training at home.
• Care workers travel between client visits.
• Employees stay after their shift to complete paperwork, handovers or closing procedures.
If this time is required by the employer, it may need to be included when calculating whether the employee has received at least the National Minimum Wage.
Apprentice Pay Required Special Attention
Apprentice pay is another area where employers frequently make mistakes.
The apprentice rate only applies in specific circumstances, and employers must also ensure apprentices are paid for both working time and required training time.
It’s also important to remember that apprentices may need to move onto a higher minimum wage rate when they:
- Turn 19, or
- Complete the first year of their apprenticeship.
Failing to make these adjustments can quickly lead to underpayment.
The Cost Of Getting It Wrong
National Minimum Wage breaches can be expensive.
Employers may be required to:
- Repay arrears to current and former employees,
- Pay financial penalties,
- Undergo HMRC investigations.
- Face reputational damage through public naming and shaming.
What appears to be a small oversight can become a significant liability when multiple employees have been affected over several years.
HMRC can require employers to review up to six years of records, making it essential to identify and address issues as early as possible.
Don't Wait For HMRC To Ask Questions
Whether or not you've received a letter from HMRC, now is a good time to review your pay practices.
Check that your arrangements around deductions, working time, training arrangements and apprentice pay are fully compliant with National Minimum Wage legislation and are all being handled correctly.
If you're unsure whether your business meets its obligations, contact Rely Ltd – HR & Training Specialists. Our team can help identify potential risks and provide practical solutions before they become an expensive HMRC problem.