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29th June 2017

Minimum Wage Awareness

Earlier this year, HMRC in conjunction with the Department for Business, Energy and Industrial Strategy, released a long list of employers who had been named and shamed for failing to pay the correct national minimum wage. Amongst those, were big companies including Debenhams Retail PLC who had failed to pay over 11,000 of their employees the correct wage.

The social care sector also features heavily, with 24 employers failing to pay over £43,000 in wages to 45 workers. At the time, it was reported that HMRC currently had a further 1500 ongoing investigations, those of which who are found to have breached the rules, will be “named and shamed” in the next publication.

What is the Government doing?

The National Minimum Wage (NMW) increases year on year so employers need to be aware and ready for the change. This year the National Living Wage (NLW) increased to £7.50 per hour and the minimum wage for a worker under the age of 24 was increased to £7.05. The Conservative Party Manifesto pledged to increase the minimum wage until it reaches 60% of median earnings, which it plans to do so by 2020. Minimum wage has increased every year since 2010, from £5.93 for workers aged 25 and over to what it is today. Given that the increase has become annual and something that is often the key point in the Government’s budget announcements, employers should be ensuring they keep up to date and prepared for these changes.

The Government has introduced a new scheme to crack down on employers who do not comply and have pledged £25.3 million to spend on minimum wage enforcement. The Government also appointed a director to oversee Labour Market Enforcement, a body which will set strategic policies to remove exploitation within the market.

What are the consequences?

Your employee can complain to both HMRC and the Employment Tribunal. If an employee complains to ACAS then they will automatically refer the issue to HMRC who will then launch an investigation. HMRC can impose a penalty of up to £20,000 per employee, and there are implications for directors too, who can be disqualified from being a company director for up to 15 years.

In addition, the “named and shamed” list attracts a lot of attention in the press upon its release which can mean harm to your company’s reputation.

What can you do to protect your company?

As an employer, you should ensure that you have clear systems in place that identify workers who will need to move up a pay bracket. It is not just the increase to the statutory minimum that an employer needs to be aware of, you need to ensure you have effective systems in place to change a worker’s pay in line with their age.

Employers should also be aware of the pitfalls of wage deductions. An employer might be paying their staff above the minimum wage, however, the issue arises when certain deductions are made which then results in that employee’s wage being reduced below the minimum. You should take legal advice before making any deductions to pay, to ensure that you have both the contractual right and to ensure that you are not breaching the law in respect of minimum wages that your employees are entitled to.

*All information is correct at the time of publishing

Anthony Fox

Napthens LLP – Employment Law Specialist

Anthony is one of our Employment Law Specialists from Napthens Solicitors. Read more

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