Home Articles & Features The importance of getting the minimum wage right

The importance of getting the minimum wage right

In recent months, the headlines have been full of stories about the minimum wage. The latest story reports that British-based factory workers producing garments for a string of top fashion brands are being paid less than half the legal minimum wage, a new undercover film claims. Textile firms making products for North West fashion retailers such as Boohoo and Missguided are paying their UK workers between £3 and £3.50 an hour. Where are employers going wrong?

The introduction of the National Living Wage (NLW), a new rate of pay for workers aged 25 and over, has partly been blamed for an increase in non-compliance with minimum wage laws. It came as no surprise that the largest number of employers ‘named and shamed’ was in August 2016, a mere four months after the NLW was introduced in April 2016. A lack of knowledge surrounding the new rate and who it applied to is, however, no excuse because employers cannot use ignorance as a defence.

Employers need to ensure they are keeping up to date with changes to the rates of minimum wage. The past year has been more complex than normal with NLW introduced and only National Minimum Wage (NMW) increasing in October 2016. From April 2017, both NMW and NLW will be reviewed and increased each April. This aligns the two rates and ensures employers only have to deal with one wage increase a year; this is important from an administrative aspect.

From April 2017, NLW will increase to £7.50 per hour and NMW rates will increase by 5-10p depending on the age of the worker. The early confirmation of these increases allows employers to assess their pay practices in advance to ensure compliance from April. Employers also need to be au fait with who gets what and what is included in minimum wage. Having an office birthday calendar is quite important from a pay view as it enables employers to see who will be moving between minimum wage bands in advance.

The increased government and HMRC focus highlights why it’s so important employers are getting this right. Employers face being publicly ‘named and shamed’, having to repay all underpayments due and having a penalty fine of up to 200% of the underpayments, set at a maximum of £20,000 per worker. In the Autumn Statement, the government announced a yearly increase of £4.3 million to go towards enforcement. This increase will be used to fund specific teams which target those sectors and regions most vulnerable to underpayment of minimum wage.

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