New research warns that firms could be inadvertently putting themselves at risk of fines after breaking National Minimum Wage laws.
Grant Thompson UK, an accountancy firm, states that it has seen a marked rise in the number of companies being investigated for potential breaches of National Minimum Wage laws.
UK legislation states that almost all workers are entitled to the minimum pay per hour, excluding self-employed people, company directors and volunteers.
However, many employers are falling into the trap of underpaying staff unintentionally through salary sacrifice schemes including workplace pension schemes and making employees pay for workwear using their own wages.
The Government recently warned employers against these commonplace practices with almost 200 businesses being singled out for breaching these laws including John Lewis, the Body Shop and Pret A Manger.
Over the span of seven years, a total of £2.1 million was found to be owed to over 34,000 workers. Companies who were found guilty of underpaying staff were forced to pay back what they owed in addition to a £3.2 million fine.
This comes as the HM Revenue and Customs (HMRC) have had their enforcement budget increased by 99 per cent since 2016, allowing them to clamp down on National Minimum Wage offences.
As a result of this, the number of enforcement officers has increased by 330 to 450 presently, rising by over a third.
Additionally, the penalties which the Government are handing out has also increased to 200 per cent of the underpayment, compared to just 50 per cent in 2014.
Business Minister Paul Scully said:
Our minimum wage laws are there to ensure a fair day’s work gets a fair day’s pay – it is unacceptable for any company to come up short.
This government will continue to protect workers’ rights vigilantly, and employers that short-change workers won’t get off lightly.
In April, around half of employers had to increase their lowest pay rate to bring wages into line with the new statutory minimum.
During this time, the National Living Wage increased to £8.91 an hour for workers aged 23 or over. The statutory minimum rates for younger workers also rose to £8.36 for workers aged 21 and 22; £6.56 to workers aged 18 to 20 and £4.30 for apprentices aged under 19 or in the 1st year of their apprenticeship.
Previous research conducted by the Incomes Data Research found that almost four in five employers (78 per cent) felt that the current levels of National Living Wage were appropriate. However, a fifth believed this was too low.
Louisa Withers, Director at IDR, stated:
Some employers also voiced concerns about the knock-on impact of a rising minimum wage on differentials with rates for staff higher up pay structures.