As an employer, ensuring compliance with the national minimum wage (NMW) is crucial. Unfortunately, there are several common mistakes that employers unknowingly make, resulting in underpayment of their employees.
Payroll Umbrella Services aims to help employers avoid these pitfalls and ensure national minimum wage compliance.
1. Misclassifying Workers as Salaried Employees
One of the most common errors is incorrectly categorizing workers as salaried employees when they may fall under other categories like time work, piece work, or unmeasured work. Each category has different rules and calculation methods for determining national minimum wage . Employers must carefully review workers’ contracts and conditions to ensure accurate classification and appropriate payment.
2. Salary Sacrifice
Many employers offer salary sacrifice schemes for benefits like pensions, childcare vouchers, or cycle-to-work programs. While these schemes are beneficial, employers must be cautious not to allow employees to sacrifice too much pay, causing their wages to fall below NMW. It’s essential to consider post-salary sacrifice pay when calculating NMW compliance.
3. Insufficient Time Records
Employers must accurately record the actual hours worked by employees. Relying solely on shift allocation records or rounding up working hours can lead to underpayment. Even minor additional time spent working, such as handling customer inquiries, should be properly recorded to ensure fair compensation.
4. Ignoring Deductions
Deductions made via payroll for savings schemes, uniform, tools, or employee benefits may reduce pay for NMW purposes. Employers should carefully review all deductions to determine if they impact employees’ NMW entitlements. HMRC takes a broad view of deductions, so it’s important to ensure compliance.
5. Failing to Uplift Pay for Apprentices
Apprentices under 19 years old or in the first year of their apprenticeship are entitled to the apprenticeship rate, which is lower than the standard NMW. However, once they reach the second year or turn 19, their pay should be uplifted to the appropriate national minimum wage rate. Employers often overlook this uplift, resulting in significant underpayment. Properly recording apprenticeship start dates and ages and setting reminders can prevent this mistake.
By partnering with Payroll Umbrella Services, employers can avoid these common NMW mistakes and ensure compliance with regulations. Our expertise in payroll management and comprehensive services can help businesses navigate the complexities of national minimum wage calculations, record-keeping, and overall wage compliance. Get A Quote Now