Background
HM Revenue & Customs (“HMRC”) are currently contacting many employers and agents in the Birmingham area in respect of the National Minimum Wage (NMW) rules. Employers are being asked to check that they are paying the NMW correctly and if any issues are identified to correct the mistakes straight away. HMRC will be investigating those who do not appear to be compliant with the rules. We have seen a number of these letters and understand that HMRC will be targeting other graphical areas in due course.
There are a number of considerations to be made when looking at NMW, it is not as simple as just paying the correct rate for the employee’s age based on the hours worked.
Common errors
It is worth considering some of the common errors that have previously been highlighted by HMRC as it is easy to inadvertently fall foul of the rules. These include:
- Paying an incorrect rate by failing to implement annual increases, missing birthdays and therefore not moving workers from one age band to another;
- Making deductions or payments from wages which reduce an employee’s wage below the NMW or NLW rates. Examples include deductions for uniforms or tools, and particular care needs to be taken where salary sacrifice arrangements are in place;
- Not accounting for unpaid working time, which is essentially hours worked and not paid, and examples include team handovers between shifts, time helping to shut up shop, travelling time between assignments or training;
- Failure to pay sufficient money for any time worked during a sleep-in-shift;
- Paying the minimum wage apprentice rate when the worker isn’t a genuine apprentice, or before a worker starts their apprenticeship, or after it ends;
- Continuing to pay the minimum apprentice rate to apprentices who are aged 19 years or over when they have completed the first year of their apprenticeship;
- Failure to pay an apprentice for the time they have spent training or studying as part of their apprenticeship;
- Incorrectly applying the minimum wage accommodation offset when an employer provides living accommodation to a worker;
- Failing to classify workers correctly, for example mistakenly treating them as either volunteers or self-employed.
- Including top ups to pay that do not qualify towards the national minimum wage or national living wage rate, for example an extra premium for overtime or tips from customers.
Current National Minimum Wage Rates
As a reminder the rates of National Living Wage (NLW) and National Minimum Wage (NMW) that currently apply and should have been effective for pay periods starting on or after 1 April 2023 are as follows:
- the rate for 23+ £10.42 an hour
- the rate for 21 to 22 year £10.18 an hour
- the rate for 18 to 20 year olds £7.49 an hour
- the rate for 16 to 17 year olds £5.28 an hour
- the rate for apprentices £5.28 an hour
- the rate for accommodation offset £9.10 an hour.
Most workers in the UK, over school leaving age, are legally entitled to be paid at least the NMW or the NLW and all employers have to pay the relevant rate if the individual is entitled to it. It makes no difference:
- if the employee is paid weekly or monthly, by cheque, in cash or in another way
- if the employee works full time, part time or any other working pattern
- if the employee works at the business premises or elsewhere
- what size the business is
- where the business is in the UK.
If you would like any advice or assistance in connection with payroll, or alternatively would like to discuss any of the issues raised above, then please contact our Tax Director, Jenny Marks.
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