At enlightenHR, your local HR company serving clients in Devon, Bristol, and Swindon, we believe in empowering businesses with actionable, practical advice on a myriad of employment and HR related issues. One key aspect that employers often struggle with is the National Minimum Wage (NMW). This can be a complex area, with many pitfalls potentially leading to non-compliance and serious penalties. Here are five common NMW mistakes that employers frequently make.
Misclassifying workers as “salaried”
It’s vital to accurately categorise your employees’ work type – be it salaried, time work, piece work or unmeasured. This is crucial as NMW rules differ for each category. If the specific conditions of a salaried contract aren’t met, the employee isn’t classified as salaried and should be categorised accordingly. Misclassification can lead to unintentional NMW underpayment.
Excessive salary sacrifice
While salary sacrifice schemes for pensions, childcare vouchers or cycle-to-work schemes are beneficial, they can inadvertently lead to NMW non-compliance if the sacrificed salary reduces the worker’s gross pay below NMW. Always calculate NMW based on post-salary sacrifice pay.
Inadequate record keeping
Maintaining accurate records of all working hours is vital for NMW compliance. Systems that round up or round down actual working hours or fail to account for additional time worked can lead to underpayment.
Overlooking payroll deductions
Employers may unknowingly breach NMW laws by deducting amounts for a variety of reasons – savings schemes, uniforms, tools, administrative charges, etc. These deductions reduce the pay for NMW purposes and could result in non-compliance.
Not uplifting pay
Many employers overlook age or apprenticeship-related pay uplifts, which can lead to significant NMW underpayment. It’s crucial to track apprenticeship start dates, ages, and set reminders for pay increases to ensure NMW compliance.
Avoiding these common NMW mistakes is crucial for any business wanting to remain compliant with UK employment law. At enlightenHR, we’re committed to providing professional advice on such complex issues. Our clients praise us for our pragmatic, solution-oriented advice that fosters compliance and drives business results. Reach out to us today for any employment or HR-related concerns.
