It’s been 20 years since the introduction of the national minimum wage (NMW). Although businesses went through major changes to meet the requirements of the new policy, evidence suggests that it has had a long-term positive impact on the workforce, inequality and social mobility.

In fact, the very lowest-paid full-time worker now earns roughly £5,000 more per year, according to a report released by the Low Pay Commission earlier this year.

Remaining compliant, however, isn’t straightforward. The rate of NMW is increasing quickly, even catching up to businesses that have historically paid well above it. As a result, more and more businesses are rethinking their pay structures, which in turn may negatively impact on already marginalised sections of the UK workforce.

The complexity of national minimum wage rules

The challenges of complying with national minimum wage requirements can be overcome, and it’s important they are to bolster fair workplace practices and social mobility. First, organisations need to understand what they are.

The biggest compliance challenge is the sheer complexity of NMW rules. For payroll teams, the devil really is in the detail. Most businesses that have fallen foul of the law will have done so inadvertently due to one or more common oversights.

Unfortunately, this meant employers paid out nearly £30 million last year in penalties and arrears last year according to the Department of Business, Energy & Industrial Strategy.

https://diversityq.com/stigma-around-regional-accents-is-hindering-social-mobility-in-the-uk-1507526/

What exactly are the common pitfalls? Here are five to know about:

1. Working time and the pay reference period

Every day more workers are entering flexible and often unpredictable working arrangements.

This makes determining the salaried working time – or the working time for which the employee must be paid – a big challenge. When an employee doesn’t work the traditional 9 to 5, what time do they need to be compensated for?

The government views salaried working time as not just time spent at work, but also:

• Time spent waiting to start or finish work (for example, if the company has a system for clocking on and off)

• Time spent travelling for work purposes (for example, if an employee works across multiple company locations)

• Time spent waiting on-call or standby near their place of work (for example, if an employee works in health and social care)

In short, employees must be paid the national minimum wage for any additional time they spend in these areas.

A similar challenge is understanding the rules around the pay reference period. This refers to how often someone is paid; for example, every week, every two weeks, or every month.

Even when employees in sectors like retail or social care work highly varied hours, the employer must pay the right rate of NMW for every pay period in isolation.

In other words, employers can’t pay below the rate in one pay period and then simply make up the amount in the next period.

2. Voluntary salary sacrifice

Many employees now make voluntary deductions to their salaries in order to receive a non-cash benefit. Popular examples are health insurance, discounted childcare vouchers and saving schemes.

While these initiatives support employee wellbeing, they can’t contradict NMW rules. This means that any salary sacrifice deductions must be capped so that they don’t accidentally push employees below the correct rate of NMW.

3. Apprenticeships and work experience placements

Apprentices also raise complicated questions: when should they be paid the apprentice rate of pay, and when should this change to the NMW?

All apprentices must be paid the NMW until they have a formal training agreement in place for their apprenticeship. After that, it depends on two things: 1) The individual’s age and 2) How far they have progressed in their scheme.

Individuals are entitled to the apprentice rate of pay if they are under the age of 19, or over the age of 19 but still in the first year of their apprenticeship. However, they are entitled to the NMW if they are over the age of 19 or have completed the first year of their apprenticeship.

Work experience schemes are a bit of a grey area. Normally, those in work experience don’t legally have to be paid. But if they actually carry out any work on an independent basis, they do have to be paid the NMW.

https://diversityq.com/qa-calls-for-radical-overhaul-of-apprenticeships-to-boost-social-mobility-1507704/

4. Uniforms

If the work experience scheme is sponsored by the government, an educational institution or the European Union, these rules don’t apply.

Employers often ask employees to pay for required items of uniform out of their salaries.

Again, this needs to be treated carefully. Employers can’t make these deductions if they bring the individual below the NMW threshold, and the cost can’t be spread over multiple pay reference periods either.

This only applies if the uniform is required. If it’s optional and the individual chooses to pay for it, these deductions will not be seen to reduce the NMW.

5. Tips and gratuities

Restaurant and hospitality businesses may assume that tips, service charges and gratuities can be used to supplement an individual’s wages so that they receive the NMW.

This isn’t the case – any additional reward is earned on top of the NMW, not as part of it.

Ensuring national minimum wage compliance

We know that payroll professionals hold themselves to the highest standards when it comes to accuracy and efficiency. They stay firmly up-to-date with changing legislation and will typically plan ahead in anticipation of further changes.

Despite this, it’s still hugely costly, time-consuming and risky to manually conduct complex payroll procedures to make sure every individual is paid the national minimum wage. This is especially true for businesses with many hundreds or thousands of employees.

It’s important to consider the role that modern technology can play in helping to automate the process. This includes using software to automatically run checks on large payroll datasets and detect any individuals that have fallen below the NMW threshold – something which can all too easily happen after too many deductions or a wrong calculation.

Supporting employee wellbeing

Maintaining compliance is a major upside to taking a tech-focused solution, but it’s not the only one. Using more advanced systems to support the accuracy and efficiency of payroll also demonstrates a commitment to being a responsible employer, as it ensures employees will always receive the wage they are entitled to.

This is important because it’s surprising how often problems can occur. In a recent survey, Zellis found that 60% of employees have spotted mistakes on their payslips, while 39% have been paid late on at least one occasion.

As a result of costly mistakes made with their pay and rewards:

• Roughly half (48%) said it made them feel undervalued by their employer
• A similar number (40%) said it made them feel at risk in their financial situation
• A quarter (25%) said they became less engaged and productive at work
• One in five (21%) have actually changed jobs

The survey further revealed the specific impact of these mistakes on financial wellbeing:

• More than a third said they had missed payments on direct debits (37%)
• Just under a third said they had gone into their overdraft (31%)
• Around a quarter said they had incurred bank charges (26%) and suffered damage to their credit rating (24%)

The companies Zellis has worked with on payroll maintain very high standards of accuracy, but these findings suggest there is a problem for UK businesses on a nationwide scale.

While overlooking the importance of a reliable payroll system can have damaging HR consequences, the reverse is also true. Since people are the core of any successful business, ensuring they have excellent pay and rewards experiences will have a positive long-term impact on talent wellbeing, engagement and retention.

https://diversityq.com/lower-paid-staff-are-more-afraid-of-discussing-mental-health-issues-with-employers-1004330/