Government confirms that employers who fail to meet the requirement to pay staff minimum wage will be ‘named and shamed’

11 February 2020

HRMC and the Department for Business, Energy & Industrial Strategy (BEIS) have confirmed, in a press release, that employers who fail to pay the National Minimum Wage (NMW) or National Living Wage (NLW) to their employees will be publicly named in an attempt to deter unscrupulous businesses from flouting their employment law duties.

Following a review of the public naming scheme, the decision was made that it should continue, but that increased support should be provided by government departments to enable employers to comply with existing NMW legislation, which is highly complex and many employers admit that they grapple with.  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 workforces, but that threshold will be increased to £500. This is in an attempt to stop the publication of company names where there has been a genuine mistake, or oversight, or where there has been incorrect interpretation of NMW legislation. The employer will still be required to correct any errors and will need to pay workers back accordingly and can be handed fines of up to 200% of the arrears, but without the added embarrassment of having their name published for all and sundry to see.

The press release provided further information relating to plans to amend regulations to increase the range of pay arrangements available to companies employing ‘salaried hours workers’. ‘Salaried hours workers’ are those that receive an annual salary in equal instalments for a set number of contracted hours. The changes will mean that workers who have varied hours and therefore, pay checks, each period can be classified as salaried workers in the future. This will mean that there is more flexibility around how salaried workers are paid but that protections for workers are not compromised in any way. It also means that employers are less likely to fall foul of the convoluted NMW legislation which historically caused issues when individuals were paid drastically differently values from one month to the next.

It is really encouraging that the proposed changes incorporate the  themes that were presented in the CIPP’s response to the initial BEIS consultation on Salaried Workers and  Salary Sacrifice Schemes. The press release listed the following changes:

  • Fortnightly and 4-weekly pay cycles will be permitted for salary workers. This is a big win as it means that it will include a large proportion of individuals who work within the retail sector, where there seems to be higher levels of non-compliance with NMW regulations
  • Employers will now be allowed to choose the ‘calculation year’ appropriate to their workers, which will enable them to monitor the hours worked by salaried workers to try and prevent underpayment of wages
  • 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 in pay

The new changes are due to come into effect from 6 April 2020 but are subject to standard Parliamentary approvals at the time of writing.

The government has also determined that, where employers offering salary sacrifice and deduction schemes bring payments below NMW rates, there will be no related financial penalties. There will be conditions imposed upon this, inclusive of the fact that the worker must have directly opted into the scheme and the information given at this stage is that deductions of NMW for uniform and other items connected with the worker’s employment will still be penalised.

The government seems to have accepted that the NMW legislation as it stands is highly complex and will be proactive in improving NMW guidance on the Gov.UK pages and will make it easier to navigate. There will be more in-depth guides on specific compliance issues, and new user-friendly guidance will be published shortly. There will be more help available to employers who operate deduction or salary sacrifice schemes, in the form of a helpline, and finally, HMRC will visit new and smaller businesses to provide education on the NMW to support them in getting it right first time.

The upcoming Employment Bill is expected to follow on from the update to the NMW regulations and discusses plans to create a Single Enforcement Body to give the government greater powers to clamp down on employment law breaches and to stop unscrupulous employers.

 


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