After a review by the Government, the scheme which “names and shames” businesses that fail to pay National Minimum Wage (NMW) will now resume with some amendments.
The changes will “see naming rounds occur more often and will enhance the effectiveness of the measure as a deterrent” according to the Department of Business, Energy and Industrial Strategy (BEIS).
The threshold for naming employers has increased as well, meaning firms that owe arrears of more than £500 in NMW payments to their workforces will now be named. The threshold was previously £100. This change means those companies who fall short of the rules by a small amount will not be named, as long as they correct their mistakes.
If a business is underpaying its staff by less than £100 it will be given the chance to correct its mistakes without being “named and shamed”, however, it may still lead to a fine of up to 200 per cent of the arrears.
The new rules see a new approach to both “salaried hours workers” and “salary sacrifice”. Salaried hours workers, which are workers who receive an annual salary in equal instalments for a set number of contracted hours.
The new changes means that workers who are often paid hourly or per day and consequently have different pay checks every month, such as those in the retail industry, can be classified as salaried workers and are less likely to be caught out by the NMW legislation. The BEIS said these changes will provide more “flexibility” in how salaried workers are paid.
Employers offering salary sacrifice will no longer be subject to financial penalties if the scheme brings its payment to below NMW.
Deductions of NMW for uniform and other items connected with the worker’s employment will continue to be penalised.
Other changes to the system include:
- Permitting additional payment cycles for salaried workers, including fortnightly and 4-weekly cycles, providing choice and flexibility to employers and workers
- Allowing employers to choose the ‘calculation year’ fit for their workers, helping them to better monitor the hours worked by salaried workers and identify potential underpayment of wages
- Ensuring salaried workers can receive premium pay, for example for working on Bank Holidays, without losing their entitlement to equal and regular instalments in pay.
These changes will come in to effect on 06/04/20. The Government is also doing more to support businesses who comply with the NMW rules such as:
- Improve NMW guidance available through the GOV.UK website, making it more accessible and easier to navigate. This includes new thematic guides on specific compliance issues, such as pay deductions and uniform policy. This revamped guidance will be published shortly.
- Proactively support new, small businesses. HMRC will visit selected new, small businesses to educate them on the National Minimum Wage and support those businesses in getting their practices right from the start
- Provide more support via a helpline for employers who operate deduction or salary sacrifice schemes. Employers will be able to access support and information directly from HMRC
Kelly Tolhurst, business minister said:
Anyone who is entitled to the minimum wage should receive it – no ifs, no buts – and we’re cracking down on companies that underpay their workers.
We also want to make it as easy as possible for employers, especially small businesses and those trying to do right by their staff, to comply with the NMW rules, which is why we’re reforming regulations.
Matthew Taylor, director of Labour Market Enforcement, said:
I welcome today’s announcement by the government and believe employers will benefit from the greater clarity these revisions bring to the minimum wage rules for salaried workers.
Particularly welcome is the news of the reintroduction of the NMW Naming Scheme, that both recognises the sharper focus advocated by my predecessor and follows a stronger compliance and education approach to help employers get it right.
Lucy Lewis, partner at law firm Lewis Silkin, said:
For a while it has been unclear whether the review of the National Minimum Wage rules would result in an end to the blunt naming and shaming approach to compliance. The National Minimum Wage rules had drawn criticism for not differentiating between accidental non-compliance and deliberate decisions to underpay, or over work, individuals. High profile examples of accidental non-compliance included a payroll system that didn’t prevent salary being sacrificed below minimum wage or pay smoothing – which allowed hourly paid employees to receive the same monthly amount even though they might work fewer days in shorter months, and was largely welcomed by employees whose outgoings didn’t reduce in shorter months.
The announcement of a new approach provides welcome nuance and meets the requirements of the businesses who contributed to the review to ensure that employers who are inadvertently in breach, often by trying to the right things, are treated differently than those who set out to take advantage of low paid employees.
However, it is clear that the increase in National Minimum Wage compliance we have seen will continue and we would encourage all employers, particularly those with low paid salaried employees who work long hours, to review their pay and working hours policies.