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Employers offered stark reminder to pay staff correctly

As an employer, you have a legal responsibility to ensure your staff are paid correctly and not doing this has serious consequences.

The Department for Business and Trade (DBT) has released its list of companies that have been fined for failing to pay the National Minimum Wage (NMW) and National Living Wage (NLW).

It’s a big reminder to all UK employers to ensure they know their legal obligations and make sure their staff are being paid correctly.

What are your minimum wage obligations?

As an employer, you are legally obliged to pay any employees aged 16 to 20 the NMW and any employees over 21 the NLW.

Currently, the NLW is £12.21 while the minimum wage for anyone under 18 is £7.55, and for anyone aged between 18 and 20, the minimum wage is £10.

There is also an apprentice rate of £7.55, which applies to anyone under 19 doing an apprenticeship and anyone over 19 who is in the first year of their apprenticeship.

When calculating minimum wage payments, you need to factor in several things, including Income Tax and National Insurance contributions, wage advances or loans, repayment of wage advances or loans and the repayment of overpaid wages any penalty charges for misconduct.

It is very important that you monitor the NMW and NLW rate changes, as these will impact those payment factors and you will need to update your employees’ pay.

In addition to this, you also need to be aware of when an employee’s birthday moves them into the next wage bracket because the new pay rate starts straight away, regardless of the payment period you are in.

When this happens, their pay will need to be updated in line with the rate and regulations in place.

If your employee moves to the next bracket and you continue to pay them at the incorrect rate, you will be required to calculate any arrears and pay them immediately.

This may also attract unwanted attention from HM Revenue and Customs (HMRC), who could hand you a fine if they discover this.

These rates also apply to seasonal and temporary workers, so you will need to ensure they are being paid the correct rate.

Why you need to keep payment records

As the regulatory body that oversees payroll and taxes, HMRC has the right to carry out checks at any time and can ask to see your payment records.

You must keep payment records for at least six years if they were created on or after 1 April 2021 and had to be kept on 31 March 2021 under the previous rule that records must be kept for three years.

The records you keep must start from the last day of the pay reference period after the one they cover. Whether it’s digital or paper records, you must have the ability to show your records if HMRC does ask for them.

You also need to keep clear records of any contracts that outline the agreed working hours, the pay itself and conditions and any documents that prove an employee is not entitled to the minimum wage.

As HMRC can ask for records at any time, it’s essential your records are available and you do comply when asked otherwise, they will suspect you have something to hide and open a wider investigation, putting unwanted attention on your business.

Failing to meet the requirements has consequences

It is a criminal offence for you not to pay employees the NMW and NLW. HMRC take breaches like this very seriously, which can lead to heavy fines, sanctions against you and your business and criminal investigations.

The latest news from the DBT is an important reminder to all UK employers and if you are unsure about your NMW and NLW obligations, our team of employment law experts can help.

We can explain what you need to do, help you spot any concerns in your processes that could affect your records and what can happen if you fail to meet the laws in place.

We can advise and support you to ensure you know what is expected and can implement measures to meet your legal obligations.

For advice on your NMW obligations, get in touch with our team.

Amanda Hyam

Head of Dispute Resolution and Employment

I have specialised in Dispute Resolution, Civil Litigation and Employment law for more than 15 years. I understand how daunting the prospect of litigation can be and because of this I am always available to discuss concerns.