As the penalties for employers who underpay their workers is now £20,000 per worker instead of £20,000 per notice it is more vital than ever that you pay your workers the correct amount.
From 1 April 2017 The National Minimum Wage rates per hour have increased and are now as follows;
| Workers aged 25 and over | £7.50 |
| Workers aged between 21 and 25 | £7.05 |
| Workers aged between 18 and 21 | £5.60 |
| Workers aged under 18 (but over school age) | £4.05 |
| Apprentices* | £3.50 |
*This rate applies to apprentices who are between 16 and 18 or who are 19 but are in their first year of an apprenticeship. All other apprentices must get paid the National Minimum Wage for their age.
In the Employer Bulletin December 2016 five common errors in applying the National Minimum Wage (NMW) were recognised as;
- 1. Not paying the correct RATE
To make sure you are paying the correct rate you must;
- apply the annual increases,
- watch out for employees birthdays which might mean they are entitled to a higher rate,
- check the apprentice rate is valid
- 2. Making DEDUCTIONS which cause the rate of pay to be below NMW
If you deduct the cost of uniforms or for services provided by the employer such as meals or transport and the employees’ net pay then falls below the NMW then you are effectively underpaying your staff.
- 3. Including ADDITIONAL PAY when calculating NMW
You cannot include customer tips or bonuses when calculating a worker’s pay for NMW, these must be paid on top of the hourly rates.
- 4. Check the STATUS OF THE WORKER
If as an employer you engage in help from volunteers, interns or use self employed people be careful as to whether they should actually be classed as workers and receive the NMW. If you are unsure then go on the government website; https://www.gov.uk/national-minimum-wage/who-gets-the-minimum-wage
- 5. Not including all of the relevant WORKING TIME
Make sure you are paying your employees for all of the time that they work such as if they help shut up shop, clear security, time when they are training or ‘down time’ waiting. Also underpayments can arise if the employee isn’t paid for time travelling when it is connection with the workers job.
As well as those pitfalls you should also be careful when you calculate the monthly pay for an employee on minimum wage as you need to remember that a normal year includes 52 weeks and one day (as that one day could prove very costly if forgotten about!!). This means that you need to calculate the monthly pay by;
Hours worked per week x NMW x 52 1/7 weeks / 12 months = monthly salary
If you have any questions on this article and how it affects your business please get in touch here.
JLA Accounting Limited takes every care in preparing material to ensure that the content is accurate and up to date. However, no responsibility for loss for anyone acting from or refraining from acting as a result of this information can be accepted by JLA Accounting Limited.
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