Any staff you have who are paid the National Minimum Wage (NMW) are in line for an increase from 1 April 2020.
And the National Living Wage (NLW) – which is basically for those aged 25 and over – also rises.
That means your business needs to be ready for the changes. You must be prepared for the additional expenditure that you will incur.
The increase in NMW and NLW comes after an announcement by the government last year. You must pay your staff the NMW or, for over 25s, the NLW.
The new National Minimum Wage and National Living Wage rates:
*Applicable only to apprentices aged 16 to 18 and those aged 19 or over who are in their first year. All other apprentices are entitled to the National Minimum Wage for their age.
A 35-year-old employee works 37.5 hours a week. The new increase in NLW means they are paid an extra £19.13 per week.
This equates to almost an extra £1,000 per year (excluding tax & NIC calculations).
If you have five full-time employees over 25 you need to find at least an additional £5,000. It is important that your business is ready for this increased cost.
What do I need to do?
If you have any staff who are paid the NMW or NLW then you must increase their wages from 1 April.
It is also imperative to check your employees’ date of birth ahead of time to ensure they receive the correct salary.
You should start preparing now to make sure all payroll procedures are up to date and ready in time for the deadline.
As part of Guidon Group’s payroll service, we will increase hourly rates for our clients to meet the minimum requirements when the changes come into effect.
Should I pay the National Minimum Wage?
The short answer is, ’Yes!’ It is a criminal offence to not pay someone NMW or NLW if they are entitled to it. You cannot negotiate the minimum hourly rate as it is prescribed by law. However, you can pay more than the NMW or NLW.
Failure to pay the correct sum can lead to HMRC issuing employers with a Notice of Underpayment.
If tissued you are required to pay a penalty of 200% of the total amount of the underpayment. That is the difference between the amount paid and the correct NMW or NLW rate. This is halved if paid within 14 days of the notice. The maximum penalty per worker is £20,000.
So make sure you have everything in order! Not only can you be given a penalty, but your businesses can also be ‘named and shamed’ by the Department for Business, Energy & Industrial Strategy. Directors can also be disqualified for up to 15 years.
Should consultants be paid National Minimum Wage?
If your business hires external consultants, freelancers or contractors who are genuinely self-employed then you do not need to pay NMW or NLW.
Make sure that those you use are genuinely self-employed and you don’t fall foul of new IR35 rules, which are also being introduced in April. We recently looked at IR35.
Interns, voluntary workers and higher or further education students on work placements for up to a year are also exempt. You don’t have to pay NMW or NLW to workers on a government employment scheme.
If you have further questions or want to discuss our payroll service, then contact us.