How vulnerable are you or your clients to backdated claims under the National Minimum Wage (NMW) legislation? Minimum wage issues can bring about an unexpected source of trouble to businesses with low paid employees, particularly trainees.
NMW Rates
The current NMW rates can be found via the following link.
www.gov.uk/national-minimum-wage-rates
The consequences of getting the NMW wrong
HMRC have stated that they plan to 'name and shame' employers who fail to pay the NMW and this will come into effect from October 2013. This would be potentially embarrassing for any employer.
Problems generally come to light during a PAYE audit or when a disgruntled (ex) employee complains to HMRC. Penalties and interest will be charged on the unpaid NMW and employers are required to pay employees the correct NMW.
NMW audits can raise other PAYE or benefit in kind issues which can lead to further backdated tax and national insurance together with interest and penalties.
Common problem areas
- Payment of a fixed salary per the contract with no additional payments for overtime and/or little or no records of overtime worked. HMRC interview staff and impose their own calculations based on what they believe are the hours worked.
- Calculations of the hours worked under different wage arrangements and what to class as hours worked. Please follow the link below for further details.
www.gov.uk/minimum-wage-differenttypes-work
- Only a limited amount for accommodation provision can be taken into account in deciding whether the NMW is being paid. The next link provides examples for your information.
www.gov.uk/national-minimum-wageaccommodation
- Other than the accommodation deduction above, benefits in kind such as the payment of personal bills cannot be taken into account at all in ensuring the NMW is paid.
- Apprentices not being paid the correct rate according to the stage that they have reached in their apprenticeship.
Recommendations:
- Review employee contracts.
- Check that the NMW is being paid based on hours worked. Make sure there are records of hours worked, and that the business creates a standard number of hours worked based on needs.
- Carefully review wages of employees where benefits and/or accommodation are also provided.
- Where you have trainees make sure that they are on an approved apprenticeship scheme.
Smith & Williamson LLP Regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business activities. A member of Nexia International.
We have taken great care to ensure the accuracy of this newsletter. However, the newsletter is written in general terms and you are strongly recommended to seek specific advice before taking any action based on the information it contains. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. © Smith & Williamson Holdings Limited 2013. code: NTD146 exp: 31/03/14
