INFORMATION UPDATE

 New National Living Wage

1st April 2016 sees the introduction of the National Living Wage (NLW).  This means that employers from the first pay reference period beginning on or after 1st April 2016 will need to pay staff aged 25 and over the NLW, which will work as a new top rate of the National Minimum Wage (NMW). The national living wage is initially set at £7.20.   

Employers should check, in particular, that employees’ pay is not brought below the new rate by any salary-sacrifice arrangements.

Increased penalties for non-payment of the NMW and NLW

The penalty for failure to pay staff the national minimum wage doubles from 1st April 2016. The enforcement regime is the same for non-payment of the national living wage.

If HMRC investigate and find employees have been underpaid, they will not only require the employer to make good the shortfall; it is mandatory that they also require an employer to pay a financial penalty to the Secretary of State.  Previously the penalty was an amount equal to the shortfall paid to the employee. From 1st April the penalty will be doubled i.e. 200% of the amount by which a worker has been paid below the national minimum wage in each pay reference period specified in the relevant notice of underpayment.   The financial penalty will be halved if employers pay within 14 days. The overall maximum penalty of £20,000 per worker remains unchanged.

Be warned!

The budget for enforcement of the NMW and NLW for 2016 is increasing, with a new HMRC team dedicated to pursuing the most serious cases of employers deliberately not paying the NMW and NLW. HMRC powers include the imposition of penalties (see above), referring cases for criminal prosecution (see below) and naming and shaming the worst-offending employers. 

By way of reminder, employers can be prosecuted for: refusing or wilfully neglecting to pay at least equal to the national minimum wage; failing to keep or preserve national minimum wage records; making, knowingly causing or allowing the keeping of false records; producing, furnishing or knowingly causing or allowing the production of false records or information; intentionally delaying or obstructing a NMW Officer; refusing or neglecting to answer any questions, give information or produce any documents to an enforcement officer when required. 

In certain circumstances directors and other officers of a company can be personally prosecuted for these offences, even though it might be the company which committed the offence. For each individual offence, an unlimited fine can be imposed on conviction. Confiscation provisions under the Proceeds of Crime Act can also apply to these types of offences. Finally, breach of the NMW and NLW legislation could also result in a director being disqualified from being a Company director for up to 15 years! 

Phew!! So the message is – make sure you pay these minimum rates and regularly check to make sure that mistakes do not happen.