A different type of campaign on NMW
HM Revenue & Customs’ (HMRC’s) latest campaign has a different focus to its predecessors. It is aimed at employers who have not complied with national minimum wage (NMW) requirements rather than at tax avoiders.
Since May, the penalties for non-compliance have increased substantially and are now charged according to the number of people employed. For each employee, the penalty is 100% of the underpayment up to a maximum of £20,000. Arrears are calculated according to a formula that uses the current rate of NMW. In addition, employers could find themselves publicly ‘named and shamed’, which would not be good for business if it were picked up by the local press. Employers can avoid penalties and adverse publicity by making use of the NMW campaign, although of course it will still be necessary to pay any arrears. There are several areas where it is easy for employers to make mistakes:
Apprentices should be paid the apprentice rate even if they are young and inexperienced. There is no reduction for any in-house training. If an apprentice is 19 or over, the apprentice rate only applies for the first year. Where an apprentice initially starts work on a normal contract of employment before starting an apprenticeship, the appropriate age-related rate should be paid for that period.
Deductions for items required for work, such as uniforms, are taken into account when calculating the NMW. However, voluntary deductions, such as for meals, can be ignored.
Tips cannot be included in the new NMW calculation even though they are taxable.
Training required by the employer counts as working time for NMW purposes. The time spent travelling to attend training also counts if it is between the workplace and the training. It does not matter if the training is outside normal working hours.
The campaign does not have a fixed deadline, but given the generous terms offered it would be wise to make use of it as soon as possible. HMRC can be expected to ramp up their NMW enforcement once the campaign ends, typically targeting low paying sectors such as hair and beauty salons. Even if you are currently paying the correct rates of NMW, you need to look back for six years to be safe. Please get in touch if you need help with the process.