Opinion

It's important for bosses to get the minimum wage right

3 min read

16 August 2016

Following on from the government naming and shaming 200 companies that failed to pay the minimum wage, Peninsula HR's director, Alan Price, explains why it is important for bosses to implement the minimum wage in their businesses.

The government has publicly named the largest list of employers who have failed to pay workers the legal minimum wage, with 197 companies owing over £465,291. Since the tougher scheme of “naming and shaming” was introduced in October 2013, nearly 700 employers have been named with total wage arrears calculated at more than £3.5m.

Employers are responsible for calculating worker’s different entitlements to the National Minimum Wage (NMW). It is, perhaps, not surprising that the largest number of employers being named and shamed has occurred after the introduction of the National Living Wage (NLW).

Since April 2015, workers who are aged 25 or over are entitled to the NLW rate, currently £7.20 per hour, whilst other workers remain entitled to the NMW rate based on their age. The large numbers failing to pay the correct minimum wage appears to show that some employers may still be unaware of the new right to receive NLW or have failed to correctly amend wages for workers over 25.

Employers can ensure that they’re calculating minimum wage entitlements correctly by maintaining an awareness of their worker’s age and their job status, i.e. whether they are a worker, employee, self- employed or an apprentice. Additionally, employers should know the different NMW and NLW rates and keep up to date with any changes as these are normally increased every year in October.

Unsurprisingly, a large number of employers who were found in arrears of paying the minimum wage were based in the care sector. There are tricky areas in this sector such as payment for sleeping time, travel time and on-call time so employers should keep accurate records of their employee’s working patterns to ensure they can correctly calculate each individual’s wage entitlement. 

Similarly, in the retail sector, the biggest area where workers were found to be underpaid, employers need to ensure that common practices such as bag searches are not causing the employee’s hourly wage to dip below the minimum rate. 

It is important that employers pay the correct NMW and NLW to their workers to avoid harsh penalties. HMRC officers have the right to carry out a check at any time and, not only do employers face being publicly “named and shamed” by the government, there are also costly financial consequences of failing to provide workers with their legal entitlement. Employers have to pay the arrears of wages to all workers who are found to be underpaid and face a potential fine of up to £20,000 per each worker. In serious cases, the employer may also be prosecuted.

Alan Price is director of Peninsula HR.

With the National Living Wage (NLW) still being met with reluctance, we asked eight small business leaders what they thought of the Living Wage – and why they embraced it.

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