Although the National Minimum Wage seems simple on the face of it, there can be complications with it. If you've employees on (or not too far above) the NMW, here's a quick checklist of some things you might want to quickly think about:
- Are you keeping an eye on the age of your workers? If someone turns 18, 21 or 25 then NMW goes up. The rates are here.
- Tips and gratuities cannot form part of an employees wage for NMW purposes. You can't pay them less as salary, knowing that tips will then bump them over the NMW.
- If someone's required to attend training, or induction, or do some kind of trial shift, or anything similar that they're required to do as part of their job, that's working time and has to be paid.
- If you make employees buy uniforms or special clothes (in, say, retail or hospitality), then you've got to deduct what they've had to shell out from their pay to make sure NMW is still being paid. Anyone who is being paid NMW, but out of that has been made to buy some particular clothes to come to work in, has not therefore been paid NMW.
- Sometimes someone works variable hours from week to week or month to month, but is paid on a smooth salaried basis that's been calculated as meeting at least NMW overall. You need to make sure that their contract reflects that. If it doesn't, an NMW inspection could deem there were some months when the person was underpaid. As an aside, if you do go down that "smoothed" basis (which we think is a good idea more often than not), you need to be careful - if they leave having been paid for more hours than they've actually worked, you may not be able to claw back the excess in their final payslip if your contract with them doesn't mention the possibility.
- If you provide accommodation to employees, you can make deductions for that taking them below NMW - but only to a limited, small extent.
- If you're running a salary sacrifice scheme - swapping salary for some other benefit, like pension contributions - then you need to make sure nobody sacrifices salary to an extent that takes them below NMW, however much they'd like to!
HMRC's stance on NMW enforcement is becoming firmer over time (and rightly so) - maximum fines are now £20,000 per employee! Do be careful.