NMW compliance

The National Minimum Wage (NMW) and the National Living Wage (NLW) rates will rise for pay periods starting on or after 1 April 2020, but this year the increase is quite steep as each rate rises by over 6% (see table).

The current and new NMW rates are:

Employers need to be prepared for this increase in wage costs and budget accordingly, as the increases will have a knock-on effect for employer’s class 1 NIC and the amounts of pension contributions required for work-place pension schemes under auto-enrolment.

There are also new rules for salaried workers who are paid a set annual amount, but in varying amounts each week or month, according to the hours worked. The employer will be permitted to choose the “calculation year” to monitor whether these workers have been paid at least the NMW for the hours they worked.

The “name and shame” threshold for underpayment of the NMW will be raised to £500 from £100. This will allow businesses which make errors that don’t exceed £100 across their payroll, to correct those errors without the risk of adverse publicity. However, the lower threshold of £100 will continue to apply where the business has found to have broken the NMW rules in the last six years.

Written by the Tax Advice Network