Many employers that appeared in the latest naming round will pay headline rates that exceed NMW and will have underpaid workers because of technicalities in the rules that generate an effective hourly pay rate that falls below headline rate of pay and the age applicable NMW rate.
The three main causes of NMW breaches identified in the latest naming round were:
- Failing to pay the correct rate to apprentices: 28 percent of employers (190 cases) did not to pay the correct NMW rate to apprentices;
- Failure to apply NMW rate changes: 27 percent of employers (184 cases) did not increase workers' pay to the appropriate rate following the annual uplift in rates each April or when the worker was entitled to an increase following their birthday; and
- Failure to pay for all working time: 15 percent of employers (103 cases) failed to pay workers correctly for all their working time, including working before or after shifts, rounding clock-in times, unpaid travel time, and salaried hours workers working more than their basic hours.
Other failures included incorrectly identifying workers’ ‘work types’ and we are seeing an increased focus by HMRC on compliance with the salaried worker rules. Many employers do not have a time recording system in place for salaried workers and, whilst most employers are able to support that NMW is being paid for each pay period, they face difficulty in supporting that NMW is being paid during the course of the additional annual check on basic hours. The rules in this area are extremely complex, so the NMW controls applied by payroll need to be adapted to carry out both the in period and annual checks to identify potential underpayments.
Increased scrutiny of salaried workers is likely to continue, and employers should therefore review processes and controls in advance of the FWA’s launch next year. The agency has powers to inspect workplaces, issue penalties, and take legal action on behalf of workers and we expect it to focus on demonstrating results as soon as possible.
