It is 15 years since the National Minimum Wage was first introduced in 1999. It currently stands at £6.31 per hour for adult workers and this is set to increase in October to £6.50. This means that someone working 35 hours per week should be earning £221 per week, or £957 per month, before deductions. It is the responsibility of HM Revenue & Customs (HMRC) to enforce the legislation, and they have just published the latest results of their investigations.
Over the past 12 months, HMRC have investigated 1,455 cases and found underpayments in 47% of these cases. This seems a high figure, even though many of the investigations would have been the result of a complaint lodged by an employee. Total reimbursements to employees amounted to over £4.5m, and penalties of over £800,000 have been issued.
In one case a Premier League football club was ordered to pay arrears of £27,500 to over 3,000 workers. Frances O’Grady at the TUC said “It is shocking that so many employers, including some who pay their star players millions of pounds a year, are cheating low paid workers out of the minimum wage”.
Since last October new rules enabled HMRC to name and shame offenders, and the latest list of 25 employers, all small businesses, has been released. Between them they underpaid a total of £43,000 with the largest being a firm in the Wirral underpaying £7,310 to 3 workers. However, for reasons known only to themselves, HMRC have decided not to name the football club. This seems to be another example of HMRC dealing with some taxpayers more leniently than others.
In many cases the underpayments seem to be the result of misunderstandings of what should be included in the calculations. Many, for instance, resulted from the employer not paying for travelling time. One case that we recall from the early days was a result of the personal allowance being increased. The employer had agreed a net pay level with the employee. When the personal allowance increased the gross pay fell, and as a result was below the minimum wage level.
The National Minimum Wage is only one set of regulations that employers need to comply with, another being Real Time Information which we have covered previously. As part of our payroll service we endeavour to ensure that clients do not fall foul of any of these regulations.
WatkinsonBlack are pleased to advise on these as well as other matters, including providing a very cost-effective payroll bureau service. If you want to arrange a no-obligation initial meeting on any taxation or accounting matter then please contact us.
Please note that these ideas are intended to inform rather than advise and you should always obtain professional advice before taking any action.