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National Minimum Wage – April changes and compliance

Employment Matters e-update – March 2021

Overview

National Minimum Wage – April changes and compliance

From April 2021, the National Living Wage (NLW) will be the statutory minimum wage for workers aged 23 and over. It currently applies to workers aged 25 and over. The reduction in the NLW age threshold follows a review of recommendations made by the Low Pay Commission in 2019. This threshold is set to reduce further to 21 by 2024.

Different minimum wage rates apply to younger age groups, and the specific level is updated each year.  The following rates will apply from April 2021:

AgeRates from April 2021
23 and over (NLW)£8.91
21 to 22£8.36
18 to 20£6.56
Under 18£4.62
Apprentice (if under 19)£4.30

Compliance and enforcement

This is a particularly important change for employers with a number of young, low paid workers, and steps should be taken now to ensure that all workers aged 23 or over are paid at least the NLW from 1 April 2021.

HM Revenue & Customs (HMRC) enforces the National Minimum Wage and National Living Wage and compliance officers may carry out inspections of employers at any time. There is no requirement for there to a suspicion of non-compliance.

Generally speaking however, compliance officers will act in response to complaints (usually from a worker) that an employer is not paying the minimum wage, but they may also choose to investigate where it is considered there is a risk of non-payment.

HMRC has a number investigative powers under the National Minimum Wage Act 1998 which allows them to obtain information required to complete their investigation.  An enforcement officer can require employers to produce and explain records about minimum wage pay; require employers to supply further explanations as necessary to determine whether the minimum wage legislation has been complied with; interview employers and those working for them; and remove minimum wage records from business premises for copying.

If a compliance officer believes that an employer has failed to pay at least the minimum wage to a worker, a Notice of Underpayment (NoU) may be served.  A NoU can require an employer to either:

  • pay arrears of the minimum wage to each worker named on the notice; or
  • pay a penalty to the Secretary of State.

Naming and shaming

In 2020 in a bid to encourage greater compliance with national minimum wage legislation, the government announced its plan to resume ‘naming and shaming’ employers who fail to pay the national minimum wage.

The policy of naming and shaming employers in breach of NMW regulations was suspended in 2018, following complaints from businesses that had inadvertently fallen foul of the complex rules, and felt unfairly targeted by the enforcement regime.

Whilst naming and shaming has resumed, there is also a greater focus on supporting businesses to comply, and an increased emphasis on helping educate businesses on their commitments to their workforce.

On 31 December 2020 almost 140 companies, including some of the UK’s biggest household names, were named and shamed for failing to pay their workers the minimum wage.

Criminal convictions

In addition to the civil sanctions, and potential reputational damage there are six criminal offences relating to the minimum wage, for which company Directors can be personally liable.  These are:

  • refusal or wilful neglect to pay the minimum wage
  • failing to keep or preserve minimum wage records
  • causing or allowing a false entry to be made in minimum wage records
  • producing or furnishing false records or information
  • intentionally delaying or obstructing a compliance officer
  • refusing or neglecting to answer questions, give information or produce documents to a compliance officer

Although criminal sanctions are only generally appropriate in the most serious cases involving persistent and deliberate breaches, given the potential for personal liability, Directors should be aware of this risk, and actively involved in ensuring compliance.

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