Are you paying your employees enough?
QUESTION: As an employer, I have heard that there are new national minimum wage limits being introduced. How do I ensure I comply with these and what can I do to correct an underpayment to an employee?
Answer: From October 1 2015 the adult rate of the National Minimum Wage will rise by 20 pence from £6.50 to £6.70 per hour and there is a further increase in April 2016 to £7.20 per hour.
It's a criminal offence for employers not to pay someone the National Minimum Wage or to falsify payment records. The National Minimum Wage is a legal right and it is the minimum pay per hour employees are entitled to and, by law, all employers must pay.
Employers who discover they've paid a worker below the minimum wage must pay any arrears immediately. HM Revenue and Customs (HMRC) officers have the right to carry out checks at any time and ask to see payment records. They can also investigate employers, following a worker's complaint to them.
If HMRC finds that an employer hasn't been paying the correct rates, any arrears have to be paid back immediately. There will also be a penalty and offenders might be named by the government. It's the employer's responsibility to keep records proving that they are paying the minimum wage - most employers use their payroll records as proof. All records have to be kept for three years.
There is currently a National Minimum Wage Campaign which gives employers the chance to catch up and pay the correct National Minimum Wage. By volunteering to do that through the campaign you simply pay your employees all the arrears owed at the current National Minimum Wage rate and inform HMRC when you have done that. Employers also need to ensure that they continue to pay their employees the correct National Minimum Wage rate in future.
Under the National Minimum Wage Campaign you can catch up:
• as an employer (individual, partnership or company)
• on behalf of an employer (if you are a company director or company secretary)
• on behalf of someone else (for example, if you are a personal representative of a deceased person, who was an employer)
The advantage of using the National Minimum Wage Campaign is that it is always better to come to HMRC and obtain the best possible terms before HMRC comes to you. This is an opportunity to stop worrying about what might happen, have certainty about how much you should be legally paying your employees, pay any arrears and get things right for the future.
There are four steps to help you catch up:
1. Check if you're paying employees the correct rate of National Minimum Wage.
2. Make a commitment to put things right by completing a notification form.
3. Submit the disclosure form to confirm you have completed your commitment and paid all arrears of National Minimum Wage and are currently paying the right amount.
4. Pay any additional tax and National Insurance contributions due relating to National Minimum Wage arrears through your Pay As You Earn (PAYE) returns and Real Time Information.
Now is a very good time to review your payments to all your employees and make good any underpayments to employees. The recent budget announced plans to double the enforcement budget for non-payment and to set up a new team in HMRC to pursue criminal prosecutions for employers who deliberately do not pay workers the wage they are due.
Penalties for non-payment will be doubled, from 100 per cent of arrears owed to 200 per cent, although these will be halved if paid within 14 days. The maximum penalty will remain £20,000 per worker.
Are you paying enough?
:: Feargal McCormack (email@example.com) is managing partner of PKF-FPM (www.pkffpm. com).