New minimum wage rates come into force on 1 October, here's what you need to know.
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It is a legal requirement for employers to pay all of their workers at least the national minimum wage or national living wage as dictated by their age.
Minimum wages are not a new concept – they have been around in the UK since 1999 – however, the details change every year when the rates are updated.
Employers must, therefore, be alert to the new rates applicable each year for their worker to ensure that they can avoid large fines. Unfortunately, unintentional breaches of the law are dealt with in the same way as intentional ones; innocent ignorance is not a defence.
Employers should therefore make sure they are aware of the age of their employees when they start employment. Whilst age should not generally play any part in a recruitment decision, knowing how old someone is means that employers can check the correct minimum wage.
There are separate rates for younger workers and apprentices
Keeping track of birthdays is also important for employers who set their rates in line with the minimum wage as a prompt to increase pay per hour when the employee moves up into the next banding.
The National Living Wage provided a new banding for employees from April 2016, and the law now requires employers to pay at least £7.20 per hour to those aged 25 and over (unless they are apprentices within the first year of their apprenticeship).
Minimum wage law will create different challenges for employers in different sectors – those in care need to consider how to deal with employees who sleep in overnight and employers in hospitality need to know how the law applies to the treatment of tips, for example.
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.
Workers can take under-payers to court
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.
Employees who believe they are being underpaid can make a claim to an employment tribunal or HMRC.
In both cases the employer will be ordered to pay the employee what they are owed, but where HMRC find a breach, the employer will be also fined and have their name published publically as an employer who has failed to comply with the law.
Changes in low wage legislation happening on 1 October:
A new minimum wage for 21-24 year olds, increased by 3.7 per cent to £6.95 an hour
An increase in the Youth Development Rate, affecting 18-20 year olds, of 4.7 per cent to £5.55 an hour
An increase in the 16-17 Year Old Rate of 3.4 per cent to £4.00 an hour
An increase in the Apprentice Rate of 3 per cent to £3.40 an hour