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ARTICLE ORIGINALLY PUBLISHED APRIL 2016

The Living Wage and the Potential Headaches

The NMW was introduced in 1999 and at that time was £3.60 for an adult aged 22 or over. Subsequently other minimums were introduce for age ranges and apprentices and the Adult Minimum Wage became payable at 21. The 1st April 2016 brought another development—The Living Wage

Firstly let’s clarify the current position:

We have the National Minimum Wage (NMW) for those aged over 21 (but under 25) and its £6.70 (£6.90 from the 1st October).

The rate for the 18 to 20 group is £5.30 rising to £5.50 on 1st October.

For 16/17 the rate is £3.87 rising to ££4.00 on 1st October.

Finally the apprentice rate is currently £3.30 rising to £3.40 also on 1st October.

The position has been further complicated by the new National Living Wage which is for employees aged 25 and over and is £7.20.The fact that it is payable from April whereas other rates change in October just adds to the confusion. Effectively we now have a NMW for apprentices and then 4 separate age categories. There is also a “voluntary” living wage which is £8.25 an hour and a London Living Wage of £9.40 an hour—but both of these are entirely voluntary.

MAJOR PENALTIES

The fines for non payment of the living wage have increased to 200% of the arrears unless paid within 14 days, and a fine of up to £20,000 for each employee underpaid. There is also the threat of being disqualified as a director.

HMRC has a new team policing the Living Wage and hairdressing is one of the targeted sectors (we know a significant proportion of employers already named and shamed come from the hairdressing sector).Nobody should underestimate the negative publicity and damage to a salons’ reputation from an article in the local press that they are not paying their staff the minimum wage. The underpayment can be a penny an hour or a pound an hour.

Some employers might be tempted to look to dismissing staff aged over 25 or making them redundant, but targeting over 25s would break the age discrimination rules.

The Small Print

It’s important to know what is “pay” and what are the expectations if you were selected for an inspection or an employee reported you to the low pay body.

  • If you require staff to report to work 15 minutes before their start time and they aren’t paid these 15 minutes could mean you aren’t paying enough to meet the NMW or NLW.
  • The rules talk about a pay period which can be weekly, 4 weekly or monthly. Commission earned in period 1 but paid in period 2 can be counted for period one.
  • An annual bonus e.g for attendance can only count for one pay period it can’t be spread over a year.
  • You can’t count tips as contributing to the NMW however they are paid.
  • If you pay a higher rate for weekend or bank holidays then the enhancement doesn’t count for payment of the NMW or NLW.
  • However a deduction for eg meals or payment for products that takes an employee below the NMW is acceptable.
  • Anyone on a registered apprenticeship which has a college study requirement should be paid for the hours which they are studying or attending at college, even if this is an evening class. Hence, if the apprenticeship course require one day attendance at college each week, and the college day last 6 hours, the apprentice should be paid for those 6 hours – although lunch and any other breaks do not have to be paid.

A Minimum Wage Inspection

If you are selected or possibly targeted because of a call from an employee or former employee what can you expect? Typically following a telephone interview there is a request for information. In a recent case my client was given 14 days to supply:

  • copy payslips covering 3 separate months over the previous 6 months
  • individual timesheets or copies of the rota for those months
  • signed copies of the employees contracts
  • the handwritten record of training courses/events attended by workers over the last 3 years. (to demonstrate and check employees were paid for attendance unless it was genuinely voluntary!) A specific question was asked ”do any staff attend unpaid training before or after work or on their days off?”
  • Contact numbers for your workers for them to complete questionnaires

You can appreciate this isn’t a simple process and can be stressful and demanding even if you are convinced you are by the book. If nothing else check your policies and contracts immediately, if staff don’t have contracts or they haven’t been signed and returned, rectify it immediately.



David Wright Personnel

Phone - 01302 563 691

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