Paying the NMW correctly

When paying staff, it’s essential to get all the calculations absolutely correct, not only in respect of tax, NIC and other deductions, but also to determine the gross amount due. A failure to follow the complex NMW rules can trigger a penalty of 200% of the underpaid wages, and the employer may be publicly named and shamed.

The Government has just published its latest list of 260 employers who failed to pay the correct amount of NMW to workers. The list shows employers with the largest NMW underpayments at the top, so scroll to the bottom to read details of those employers who were unfortunate enough to underpay just above the £100 threshold for inclusion on this list.

Our clients could easily find their names published on this list if they fall into any of these traps:

• Not adjusting the wage rate for the age of employee – the accurate birth date must be recorded for every worker, as paying the NMW for the wrong age band is counted as an underpayment.
• Deducting amounts for uniforms, tools or safety clothing – these are not permitted deductions for the NMW.
• Deducting too much for accommodation – the maximum per day is currently £6.40, which will increase to £7 from 1 April 2018.
• Failing to account for overtime worked – all hours worked must be paid at the NMW, “unpaid” overtime is not permitted.
• Failing to factor in time spent on security searches, traveling or sleeping – care workers must be paid for time sleeping at client’s homes when providing overnight care.
• Including customer tips – any gratuities from customers, including service charges or cover charges, cannot count as part of the NMW.

Remember that salaried workers also fall under the NMW rules and their pay must be averaged over their contracted hours. We included an example of this calculation in our newsletter on 17 May 2017.

Written by the Tax Advice Network