Thanks to my accountant, Greg at Fizz Accounting, for this timely and helpful guide to a surprisingly tricky area.
The National Minimum Wage has been a hot topic recently, with some big-name employers like Argos getting caught out for underpaying their staff.
Glancing down the list of offenders, though, most of them are small businesses – and while some of them may have been deliberately flouting the law, it’s also quite likely that many of them just made a costly mistake.
It’s actually surprisingly easy to fall foul of the NMW rules. They sound simple on the face of it, but the rules are pretty complex once you look into the detail.
An obvious trap is failing to spot that one of your employees has become entitled to a higher rate of pay because they’ve had a birthday and have moved into the next NMW bracket.
But even if you’re on top of that, there are other complications that are not immediately obvious.
For example:
- Someone might have worked some hours before their birthday – but you can’t pay those hours at the rate appropriate to a younger employee. It’s their age on payday that matters.
- If an employee is paid by results rather than for working a certain number of hours (for example a commission-only salesperson), you still have to ensure they’re being paid at least NMW for the hours they work.
- Tips don’t count! Employers are not allowed to rely on tips to top their staff’s wages up to NMW.
- If you pay someone a higher hourly rate for overtime hours, the extra bit can’t be used to subsidise a basic pay rate that’s below NMW.
- Employees must be paid at least NMW for any time they spend travelling on business, for example travelling between client appointments or travelling to training sessions.
- If an employee has to meet expenses to do their job (e.g. buying tools, uniforms or equipment) and you don’t reimburse them, then those expenses are deducted from the amount of salary you pay them before calculating whether they’ve been paid NMW.
There are lots of technical details that could easily catch employers out, so if you have staff who are being paid salaries at or close to NMW, do check the detailed guidance online (or speak to us) if you have any doubts about whether you’re complying with the rules!
If you know of a business that could do with our help, please let us know – we always reward referrals with chocolate!