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What are the key changes you need to know about?

As the government remains focused on employers paying the national minimum wage (NMW) and national living wage (NLW) to employees correctly, new regulations have come into play to ensure employers are remunerating the correct rates of pay across the board.

From April 2017, the rates for national living wage and national minimum wage have been introduced and will be increased. The national living wage for those aged 25 and over is going up at the beginning of April from £7.20 per hour to £7.50 per hour. There will also be increases at the same time to the national minimum wage payable to those under 25 and apprentices. These are minimum requirements of pay and these are assessed by looking at a worker’s average salary across all of their hours of work.

As employers, you are liable and will be penalised if you do not comply with the NMW and NLW rules. These regulations are being overseen by the HMRC (HM Revenue and Customs) who will ensure enforcement of the NMW and NLW rules.

The key points you need to know about

If you haven’t planned for the new law yet, now is the time to do it. There is an array of useful information on hand to help you learn more about the legal aspects. ACAS (Advisory, Conciliation and Arbitration Service) is one really informative source. Outlined below is an overview from ACAS. You can also find out more details on their website about the new legislations.

  • Most workers over school leaving age will be entitled to receive the NMW
  • NMW /NLW rates will be reviewed annually by the low pay commission
  • HRMC can take employers to court for not paying the NMW/NLW
  • Exemptions can apply to those who receive the NMW/NLW – these do not relate to the size of the business, sector, job or region
  • The compulsory NLW is the national rate set for people aged 25 and over

The rates of pay changes from 2016 to 2017

It is important to note that these rates, which came into force 1 October 2016, apply to pay reference periods beginning on or after that date. The rates from 1 October 2016 are:

  • £7.20 per hour – 25 yrs old and over
  • £6.95 per hour – 21-24 yrs old
  • £5.55 per hour 18-20 yrs old
  • £4 per hour – 16-17 yrs old
  • £3.40 for apprentices under 19 or 19 or over who are in the first year of apprenticeship

The rates will then change every April starting April 2017. The rates from 1 April 2017 will be:

  • £7.50 per hour – 25 yrs old and over
  • £7.05 per hour – 21-24 yrs old
  • £5.60 per hour – 18-20 yrs old
  • £4.05 per hour – 16-17 yrs old
  • £3.50 for apprentices under 19 or 19 or over who are in the first year of apprenticeship

What are the penalties for non-compliance of NMW and NLW?

Should you as an employer for any reason not pay your employees the NMW or to falsify payment records, you’ll be breaking the law. If you don`t pay the correct rate, a worker may make a formal grievance against you, if you do not rectify the matter, by rights it can be taken further by the employee.

With the introduction of the NLW, the penalty for non-payment will be 200% of the amount owed, unless the arrears are paid within 14 days. The maximum fine for non-payment will be £20,000 per worker. However, if you as an employer fails to pay, you would be banned from being a company director for up to 15 years – that`s a heavy price to pay!

Lending helping hand to enforce the legislation

With the new law coming into force, the government has confirmed that it will be investing an additional £4.3 million a year to manage the national minimum wage administration and enforcement, enabling the HMRC task-teams to review employers considered most at risk of non-compliance, all in a bid to help support them to fulfil the new law.

What rights do workers have?

A worker can make a complaint to HMRC who will investigate. If HMRC find that an employer hasn’t paid at least the NMW, they can send a notice of arrears plus a penalty for not paying the correct rate of pay to the worker.

Workers are allowed to see their own pay records and can complain to an employment tribunal if not able to do so. They can also complain to HMRC or to a tribunal if they have not been paid the NMW. They can call the confidential helpline 0800 917 2368.

You’ll need to be prepared for this every year

Do make sure you’ve got a plan in place and are fully prepared for future changes. From 2017, the changes to the NLW and NMW rates will be aligned each year and updates will take place on 1 April of each year.

In summary

You must consider your legal requirements and make sure your business is fully compliant. If you do not follow legislative requirements and regulations, you and your business can face serious penalties, so it makes business sense to plan ahead for the changes and ensure you are always one step ahead, otherwise the penalties in place will be enforced.

Jenna Gorham MCIPD
HR consultant, aspire cambridge

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