Changes to National Minimum Wage enforcement are welcome
Commenting on the news that the government is to amend the rules around the naming and shaming of companies judged to be in breach of National Minimum Wage (NMW) rules, Charlie Barnes, associate director from RSM Legal LLP said:
‘Today’s announcement shows that the government has listened and acted on the concerns raised by employers about the way in which the NMW rules were being enforced.
‘While it is right that rules should be enforced effectively, many employers were finding themselves being named for relatively minor infringements or where the breaches of the rules were purely technical in nature.
‘The raising of the threshold for naming employers, from £100 to £500 of arrears, should mean that there will be a more proportionate approach to encouraging compliance while maintaining an effective deterrent for the more serious offenders. However, it is still a relatively low threshold when you consider it applies across the whole workforce for the past six years.
‘These changes should also resolve a big issue for employers that offer salary sacrifice schemes. Previously, HMRC guidance confirmed that employers could not offer salary sacrifice schemes for benefits such as pensions, gym membership or cycle to work, to those on NMW as it was the post salary sacrifice pay that was looked at for NMW compliance purposes.
‘As a result of these changes, employers will now be able to make these schemes available to those at the lower end of the pay scale so long as certain conditions are met. It also looks as though this change will affect other schemes where employers make deductions from pay for the provision of products or services to their employees. What isn’t clear yet is whether these rules will be retrospective meaning that employers might still have to self-correct for any NMW underpayments arising prior to these changes coming into effect on 6 April 2020.
‘The government has also relaxed some of the conditions concerning when a worker will be treated as carrying out salaried work (so that their pay can be averaged over the year) which is welcome, particularly for retail, hospitality and leisure employers, as this is an area where many have been caught out by technical breaches of NMW. However, we expect HMRC to maintain its focus on monitoring the time workers actually work over the course of the year to ensure compliance with NMW.
‘Finally, today’s announcement references the creation of a Single Enforcement Body which will take responsibility for employment law breaches. While this idea has been in gestation for some time, we are set to get further details about its introduction when the Employment Bill is published later this Spring.’