National Minimum Wage – common mistakes

Despite certain parts of the hospitality industry feeling the strain in recent months, the Government has shown no let-up in their uncompromising stance on National Minimum Wage (NMW) compliance. HMRC has now employed a dedicated team of compliance officers to operate a “name and shame” system for those employers found to be in breach of the new rules. According to the most recent name and shame system, among the most prolific offending sectors are hospitality businesses.

As well as having to ensure the additional pay due to employees is provided or face the threat of incurring immediate penalties, businesses must also now consider the reputational risk.

Penalties were increased from 100% to 200% of the arrears owed to workers from April 2016, up to a maximum of £20,000. The penalty can be reduced to 50% where the unpaid wages and the penalty are paid in full within 14 days of the HMRC notice of underpayment – all the more reason to identify the issues yourself.

Here’s a list of the most common mistakes:
  • using tips to make up pay – irrespective of whether paid direct or through a tronc;
  • pay averaging – e.g. overtime rates cannot make up a shortfall on normal hourly rates;
  • employers not paying for time spent closing or opening premises and security checks;
  • deductions for uniforms, etc. taking staff below NMW levels. Deductions for repayments of loans are an exception to this rule;
  • salary sacrifice for child care vouchers, etc. taking staff below NMW levels;
  • incorrectly using the capped offset rates where accommodation is provided to staff (currently £44.80 per week).
In many cases of non-compliance, employers have mistakenly relied on payroll software calculating NMW correctly and flagging any issues. Employers should take care that risk areas have been properly reviewed to ensure that correct procedures are in place.

Moore Stephens offers a full NMW advisory service to help their hospitality clients to avoid unexpected liabilities and reputational damage. If you would like to know more then please do not hesitate to contact our team.

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