National Minimum Wage ‘naming and shaming’ rules overhauled
Upcoming changes to the National Minimum Wage (NMW) naming and shaming scheme will make allowances for employers who simply made a mistake. But there are no changes to the underlying rules of the NMW regime. This makes following the rules closely just as important as ever to avoid penalties.
Naming and shaming scheme to resume
The Government have announced this week that the “naming and shaming” regime for businesses found to have breached their obligations under the National Minimum Wage (NMW) Regulations will resume.
Naming and shaming was unofficially suspended 18 months ago following criticism that it had become a list of business who made mistakes. The purpose of the list was to highlight ‘bad’ employers who ignored or flouted the law. During the suspension, HM Revenue & Customs (HMRC) and the Department of Business, Energy & Industrial Strategy (BEIS) carried out a review of the scheme.
The outcome of the review is that the naming and shaming scheme should continue. However, the review also found that Government departments should provide increased support to employers to help them comply. The NMW legislation is highly complex and many employers admit they grapple with them. The announcement also confirms that the naming rounds will become more frequent in a bid to combat the issue of non-compliance.
Previously, the Government has published the names of employers who owed arrears of £100 or more in NMW payments to their workforce. That threshold will be increased to £500 in an attempt to stop the publication of company names where there has been a genuine mistake, oversight, or incorrect interpretation of NMW legislation. This increased limit won’t apply to businesses that have previously been subject to action by HMRC for failure to pay the National Minimum Wage.
Calls for the threshold for naming to be based on the average underpayment (which would benefit employers with large workforces where the amount owed per head was trivial) will not be implemented.
Despite evidence that workers paid at or near the Minimum Wage are being denied the opportunity to benefit from salary sacrifice arrangements, the Government has decided not to amend the Regulations to allow such arrangements. This will disappoint those seeking flexibility over items such as workplace pension contributions, childcare vouchers and Cycle to Work schemes. All of these benefits and schemes are backed by Government, but concerns that changes to the legislation might lead some to abuse the rules seem to have prevailed.
However, for a range of strictly defined areas, businesses who have breached NMW in relation to salary sacrifice will be able to repay their workers without either financial penalties or the embarrassment of public naming and shaming. Enhanced guidance and a helpline will be made available to businesses to prevent inadvertent breaches in future.
The Government has agreed to amend the Regulations to permit workers paid at fortnightly and four-weekly intervals to be treated as salaried for Minimum Wage purposes. This will be of significant benefit to hospitality businesses.
‘Salaried hours workers’ are those that receive an annual salary in equal instalments for a set number of contracted hours. The changes mean that workers who have varied hours and pay checks each period, can be classified as salaried workers in the future. This gives more flexibility around how salaried workers are paid without compromising protections for workers. It also means that employers are less likely to fall foul of the convoluted NMW legislation which has caused issues when individuals are paid drastically differently values from one month to the next.
In other related changes:
- Employers will now be allowed to choose the ‘calculation year’ appropriate to their workers. This will help them monitor the hours worked by salaried workers to try and prevent underpayment of wages; and
- Salaried workers will be entitled to receive premium pay, for example, for working on a Bank Holiday, without forfeiting their entitlement to equal and regular instalments of pay.
The changes do not, however, change:
- the requirement for salaried workers to have a set number of ‘basic annual hours’ set out in their written terms of employment
- the need to calculate a year on 52.1 (or, for leap years, 52.3) weeks instead of a flat 52.
All of the new changes are due to come into effect from 6 April 2020 but are subject to Parliamentary approval.
In case you had forgotten….
The National Minimum Wage rates for all workers will increase with effect from 1 April 2020 as follows:
- Aged 25 or over £8.72 (a 6.2% increase)
- Aged 21-24 £8.20
- Aged 18-20 £6.45
- Under 18 £4.55
- Apprentice £4.15
- Accommodation offset £8.20 per day
Can we help?
Despite these changes, the National Minimum Wage remains a highly complex area with many pitfalls for businesses. Small, technical, breaches can still lead to large underpayments resulting in public naming and shaming.
For help and support with meeting National Minimum Wage requirements email firstname.lastname@example.org or call 01727 838 255.