When it comes to paying your employees, complying with the National Living Wage (NLW) or Minimum Wage (NMW) is crucial to avoid penalties and reputational damage. To help employers navigate through the complexities of paying the correct minimum wage, HMRC has identified 18 common errors that you should be aware of. In this blog post, we will delve into each of these errors, providing actionable insights to protect your business and ensure you are paying your employees correctly.

1. Making deductions that reduce the worker’s pay below the statutory minimum

One common error is making unauthorized deductions from an employee’s wages. Deductions for items or expenses connected with their job should not reduce the worker’s pay below the minimum wage. It’s important to review your payroll practices and ensure compliance.

2. Deducting for the employer’s own use or benefit

While deductions made for the employer’s benefit are allowed, such deductions should not impact the worker’s pay below the statutory minimum. Ensure that any deductions or benefits are reasonable and properly accounted for.

3. Failure to pay for additional time expended during a worker’s shift

Extra time spent on tasks like team handovers or security checks should be compensated. Ensure that your workers are paid for all the time they spend at the workplace, even if no work is being provided at that time.

4. Neglecting to pay for travelling time

If your employees are required to travel as part of their job, such as visiting clients or making deliveries, make sure their travelling time is included in their pay.

5. Failure to compensate for training time

If your workers are required to undergo training, it’s essential to pay them for the time spent in training sessions. Ensure that you are adhering to the minimum wage requirements for training.

6. Inadequate payment for sleep-in shifts

Workers required to work sleep-in shifts should receive sufficient pay for the time worked during those shifts. Review your payment practices to ensure compliance.

7. Incorrectly applying the accommodation offset for living accommodations

If you provide living accommodations to your workers, ensure that the minimum wage accommodation offset is correctly applied. Seek professional advice to understand the intricacies of this calculation.

8. Paying NMW apprentice rate to non-apprentices

The NMW apprentice rate should only be applied to genuine apprentices. Ensure that you are not incorrectly categorizing workers as apprentices.

9. Timing errors with the apprentice rate

Make sure you are paying the NMW apprentice rate at the right time – before the apprentice starts the apprenticeship and not after it ends.

10. Continuing the apprentice rate for eligible candidates

Once an apprentice turns 19 or completes the first year of their apprenticeship, you should adjust their pay accordingly. Failing to do so could result in non-compliance with the minimum wage requirements.

11. Failing to pay for training time in apprenticeships

Apprentices should be compensated for the time spent on training or studying as part of their apprenticeship program. Assess your payment structure to ensure compliance.

12. Failure to apply annual increases to the NLW and NMW

Every year, starting from April 1st, the NLW and NMW rates increase. Ensure that you are aware of these annual increases and adjust your pay accordingly.

13. Neglecting to increase pay for age-related milestones

Age-related increases apply when a worker turns 18, 21, or 23. Ensure that the rate paid is adjusted as per the applicable age bracket.

14. Including non-NMW elements in pay calculations

Tips or other elements that do not count towards the NMW should not be considered when determining whether workers have been paid at least the required minimum wage.

15. Failing to pay NMW to interns and work experience candidates

Individuals undertaking internships or work experience programs may still be entitled to the NMW. Ensure that you are paying them appropriately based on their age and job responsibilities.

16. Complexity in calculating salaried staff’s pay

Salaried staff may work additional hours that reduce their pay below the minimum wage. Take into account excess hours and ensure compliance with the minimum wage requirements.

17. Proper classification of different types of workers

Different types of workers (salaried, time-based, output-based, or unmeasured) have different payment requirements. Make sure you distinguish between them and calculate the NLW/NMW accordingly.

Understanding and avoiding these common minimum wage errors is vital to protect your business from financial penalties and potential damage to your reputation. By following the guidelines provided by HMRC and ensuring compliance with the minimum wage requirements, you can establish a fair and transparent payment system that benefits both your employees and your business.

Remember, when it comes to paying your employees, it’s essential to prioritize their well-being and adhere to legal obligations. Implementing best practices can not only protect your business from legal repercussions but also foster a positive work environment where your employees feel valued and appreciated.

By being aware of these common minimum wage errors and taking steps to rectify any issues in your payroll practices, you can build a compliant and successful organization.

We Can Help

For more guidance and support on minimum wage compliance, contact KA Farr & Co to ensure your business thrives while meeting legal obligations.