With the forthcoming change in rates for the National Minimum wage (NMW) I wanted to take the opportunity to highlight a number of risks that may arise for employers.
- Paying the incorrect rate
With every NMW increase there is the risk that the increase is not applied in a timely manner to your employees’ pay.
However, HM Revenue & Customs (HMRC) have highlighted that the largest area of non-compliance actually arises from employers not having a system for identifying employees’ birthdays and when they move into a different age grouping.
For reference, the following rates take effect from 1 April 2017:
|workers aged over 25 (NLW)||£7.50 per hour (was £7.20)|
|workers aged 21 – 24:||£7.05 per hour (was £6.95)|
|workers aged 18 – 20:||£5.60 per hour (was £5.55)|
|workers aged 16 – 17:||£4.05 per hour (was £4.00)|
|apprentice rate:||£3.50 per hour (was £3.40)|
The apprentice rate will apply to apprentices aged under 19, and to apprentices aged 19 and over whilst in the first year of their apprenticeship.
2. Incorrectly categorising your staff
Worker status has always been an area under scrutiny from HMRC. Whilst the biggest perceived risk is treating someone as self-employed when the role is actually one of employment, an area there has been more commentary on recently is incorrectly classifying people as volunteers.
As might be expected, a volunteer is exempt from NMW as they are giving up their time for free. However, where expenses are paid or benefits provided, the line between a volunteer and worker becomes blurred. Once someone is classified as a worker, the NMW becomes payable.
If you have volunteers working for you and you provide benefits or reimburse expenses over and above those actually incurred on your behalf, please do get in touch so we can review your position.
3. Not paying staff for all ‘working time’
It is important to ensure that when calculating your employees’ pay you take into account all ‘working’ time. For example, this will include time for cashing up at the end of the shift, the time your employee may spend attending to a security breach or travelling time.
Where travelling time is in connection with a worker’s job it is considered working time and needs to be included in the time for which the NMW must be paid. For example, a carer travelling between patients’ homes needs to have the time travelling between locations, and not just the time attending to the patients, taken into account.
This is just a brief summary of some of the risks and is far from exhaustive, so if you wish to discuss any of the points raised in more detail, or if you have a different employment tax query, please do not hesitate to get in touch with me at email@example.com. Alternatively, you can phone me, or your usual Larking Gowen contact, on 01603 624181.