From 1 April 2016, workers aged 25 and over are entitled to the National Living Wage, currently set at £7.20 per hour. It is, in effect, a new level to the National Minimum Wage, which has been with us since 1999, so the same rules relating to calculating minimum pay rates still apply.
It’s not always straightforward to ascertain a worker’s hourly rate for minimum wage purposes. Certain payments by employers are not included and some deductions from salary payments reduce the amount that counts towards the thresholds.
The Department for Business, Innovation and Skills has issued a new guidance document to help employers calculate whether they are meeting the requirements of the legislation. The guidance, together with some useful examples, can be found here.
The penalties for getting calculations wrong can be severe, with the maximum fine from HMRC increasing up to £20,000 per worker from 1 April 2016. There is also the possibility of criminal liability and the threat of legal action from the worker.
If you need support with this or any other employment-related issue, please contact any of our Employment advisors.