New National Living Wage rates announced - what to know

Every year, the government increases the rates for the National Minimum Wage. This year’s increases have now been announced and they are as follows:

• The National Living Wage for ages 25 and above – up 6.2% to £8.72

• The National Minimum Wage for 21 to 24-year-olds – up 6.5% to £8.20

• For 18 to 20-year-olds – up 4.9% to £6.45

• For under-18s – up 4.6% to £4.55

• For apprentices – up 6.4% to £4.15

rradar tax expert Caroline Lamyman looks at what businesses need to know ahead of the rate increases coming into effect.

“Businesses need to be prepared for the NMW rises and be fully aware of the correct rates and have them in place by 6th April. They must remain compliant as there are serious repercussions for those who fail to comply.”

Consequences of underpayment

If HMRC finds that an employer has not paid at least the minimum wage, they can send a notice of underpayment plus issue a penalty for not applying the correct rate of pay.

HMRC can also take employers to the civil court for not paying the National Minimum Wage or National Living Wage. Employers who fail to pay can be banned from being a company director for up to 15 years.

In 2018-19, HMRC completed more than 3,000 investigations, identifying £24m in arrears for more than 220,000 workers.

“We’re urging our clients to get in touch if they are unsure of how these changes will affect them,” says Caroline. “The shift will bring the ‘biggest hike in hourly earnings for a decade’, according to the Low Pay Commission (LPC) and the government has said it will press ahead with recommendations by the LPC to allow workers over 21 to receive the national living wage by 2024, when it is anticipated it will reach £10.50 per hour.”

Caroline outlines some of the most common pitfalls for employers underpaying the NMW:

1. Underpaying apprentices or not having the correct paperwork in place at the right time.

2. Missing key dates for increases in the NMW.

3. Deductions from wages that breach the NMW.

4. Failing to pay travel time.

HMRC investigations

HMRC officers have the right to carry out checks at any time and ask to see payment records. They can also investigate employers if a worker complains to them.

If HMRC finds that an employer has not been paying the correct rates, any arrears have to be paid back once the notice of underpayment has been received. There will also be a fine of 200% of the arrears owed to workers, up to a maximum of £20,000 per worker.

It’s the employer’s responsibility to keep records proving that they are paying the minimum wage - most employers use their payroll records as proof. All records have to be kept for 3 years.

rradarstation

If, after reading this article, you feel unsure about the new rates for the NMW and what you need to do in order to comply, why not talk to our rradarstation advisors? rradarstation is a resource available through the AXA MLP where policyholders can access rradar’s legal advisory team over the phone or by email and a web gateway that provides over 2,000 articles, step-by-step guidance sheets, forms, sample letters and templates to download relating to running your business/organisation.