Liz Perry

Written by:

Liz Perry

Director, HR

The National Minimum Wage – how do employers get this right?

  • September 2017
  • 6 minutes

Unfortunately for employers, genuine error is not a defence to breaching the National Minimum Wage (NMW). All breaches are handled in the same way whether deliberate or through genuine error.

To identify where these errors can arise, employers should consider their employee and worker life cycle. Whilst it may seem tedious and unnecessary at the time, minor breaches of NMW can soon add up resulting in a substantial underpayment of NMW, exposing the employer to paying out the shortfall, financial penalties and the risk of brand and reputational damage through being publicly named and shamed.

Maintaining accurate data and understanding what amounts to working time for NMW purposes from the start of the employee and worker life cycle will help to avoid these errors.

What data should be tracked?

Whilst age should not play a part in any recruitment decisions, knowing how old someone will ensure an employer can pay the correct NMW from the outset. Keeping track of birthdays is also key for employers who set their salary levels in accordance with, or near to, NMW. The ability to track eligibility for NMW increases when individuals reach 18, 21 and 25 years old and recognise annual rate changes effective from 1 April each year should also be planned for.

What is classed as working time

Asking workers to attend additional training or briefings throughout the employment relationship without paying them may not seem like a ‘big ask’. However, such time is classed as working time for which they should be paid at least NMW. The impact of this decision could be costly. Unpaid monthly training or briefing updates may soon add up to a significant underpayment of NMW, particularly when your workforce is large.

What do employers need to do?

Employers must keep records for at least 3 years for all workers and ex-workers from which they can show what NMW the worker was entitled to and what they were paid. Failure to do so could result in criminal prosecution.

A proactive assessment of how you store and maintain your workforce data should be undertaken alongside a review of your current processes and procedures to ensure that both are aligned. Together they should demonstrate a robust strategy to mitigate any potential exposure.

Accurate record keeping is therefore essential, not only to gain insight into your workforce but to mitigate the risk of NMW non-compliance.

Putting in place these processes and controls will be a giant step towards ensuring your brand isn’t tarnished by being added to the list of those failing to pay NMW.

To learn more about keeping accurate data and NMW, please comment below or get in touch with Liz Perry.

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