Further HMRC guidance on National Minimum Wage and National Living Wage published

09 March 2020

HMRC has published a new online guide which is designed to assist employers in paying the National Minimum Wage (NMW) and the National Living Wage (NLW).

The guide is easy to navigate, and contains a wealth of useful information, particularly for new employers who may not have had to pay staff before. The guide confirms that, in addition to the fact that it is a criminal offence to pay someone below the NMW or NLW rate, eight out of ten people confirmed that they “would not use the services of a business if they found it paid less than National Minimum Wage”. Companies not only have a legal obligation to ensure that they pay correctly but could also face having their reputation tarnished if they do not fulfil their NMW/ NLW duties and lose business as a direct result of this.

The guidance discusses which individuals are entitled to receive NMW / NLW but also confirms which workers are not eligible. There is detailed information relating to how to calculate the minimum wage for workers, with helpful examples relating to workers who are paid by the hour, where they are paid an annual salary, in scenarios where workers are paid by the task or piece completed, and calculations for those classed as ‘other workers’.

Details surrounding how HMRC proceeds in instances where employers have not paid NMW are given. Underpaid arrears need to be paid immediately, and in certain circumstances, a fine will be issued and offenders risk being ‘named and shamed’ by the government. If the rates have increased since the underpayment took place, then employers will be required to pay the rate in operation at the time that the underpayment is identified.

A common error that employers make is incorporating certain pay elements for the purposes of calculating national minimum wage that cannot be included, and this guide confirms what is and what isn’t classed as pay for the minimum wage. Some businesses also take deductions from worker’s pay without realising that this reduces the minimum wage – there is a comprehensive of list of the deductions that do reduce minimum wage, along with those that do not.

CIPP comment

The CIPP welcomes the abundance of guidance that HMRC has made available to its customers in order to assist them in the correct calculation of NMW and NLW. It is commonly accepted that the associated legislation is somewhat complex and that a more educational focus needs to be established to ensure that employers who are actively trying to do the right thing are not penalised due to a lack of understanding. The CIPP would be interested in hearing from its members, as to whether the new guidance has been beneficial in furthering their understanding of NMW and NLW legislation. Please get in touch at [email protected].

We look forward to hearing from you!


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