30 Nov Compliance expert warns businesses to follow updated National Minimum Wage law or risk a fine of £20,000
On 21st November 2023, the UK government announced an increase of the National Minimum Wage by 9.8% to £11.44 an hour, with Apprentices seeing an increase of 21.2%.
With the new wage increases, a compliance expert has warned businesses to ensure they’re meeting the new minimum, as it was revealed earlier in 2023 that over 200 businesses breached the National Minimum Wage law.
If HMRC finds that the employer has not paid the minimum wage they may issue a fine of up to £20,000 and a minimum of £100 for each employee or worker affected, even if the underpayment is worth less.
New data by online compliance training service, Skillcast, looking at 75 fines imposed by the Information Commissioner’s Office (ICO) and Financial Conduct Authority (FCA) in the past three years, including GDPR fines, reveals the disparity between the impact of fines on small and large businesses.
Over a quarter (26%) of micro and small businesses who have been fined by either governing body are now in liquidation. Of these, a third (33%) are compulsory liquidation. A further 2% of these micro or small businesses subsequently fell into administration.
Vivek Dodd, CEO of Skillcast, has shared 10 tips on how businesses can ensure they’re compliant with the National Minimum Wage and other employment laws to avoid crippling fines.
1. Understand Applicable Laws:
Familiarise yourself with the National Minimum Wage laws. Minimum wage rates vary based on age and whether the employee is an apprentice, so make sure you’re aware of the correct pay for each employee.
2. Regularly Check for Updates:
Just like the new minimum set in November, minimum wage laws can change, so it’s essential to stay informed about any updates or changes. Regularly check government websites or consult with legal professionals to ensure you have the latest information. Also, regularly review and update your company’s wage and hour policies to align with current laws and regulations.
3. Classify Employees Correctly:
Properly classify employees as exempt or non-exempt based on their job duties and salary. Exempt employees are generally not eligible for overtime pay, while non-exempt employees are.
4. Keep Accurate Records:
Maintain accurate and up-to-date records of hours worked by each employee. This includes regular hours, overtime hours, breaks, and any other compensable time. Then, if your employees’ wages were to be assessed, you have all of the evidence.
5. Calculate Overtime Correctly:
If applicable, ensure that overtime is calculated correctly. Overtime pay is typically 1.5 times the regular hourly rate for hours worked beyond the standard workweek.
6. Review Wage and Hour Policies:
Regularly review and update your company’s wage and hour policies to align with current laws and regulations.
7. Train Management and HR Staff:
Ensure management and HR staff are well-informed about minimum wage laws and compliance requirements. This includes understanding how to handle issues such as overtime, breaks, and recordkeeping.
8. Communicate Clearly with Employees:
Clearly communicate wage and hour policies to employees. Make sure they understand their rights, including overtime pay, break periods, and the minimum wage rate.
9. Seek Legal Advice if Unsure:
If you have any doubts about compliance, consult with legal professionals who specialise in employment law. They can provide guidance specific to your business and location.
10. Conduct Internal Audits:
Periodically conduct internal audits to review your payroll and employment practices. This can help identify any potential compliance issues before they become significant problems.
For a better understanding of everyday compliance within your business, check out Skillcast’s new Basic Compliance Training plan.
