Updates to NMW changes: ensure your payroll is compliant

Staying compliant with the new NMW changes

The National Minimum Wage regulations provide protection to low income workers and incentives to work. As part of the forthcoming Employment Bill, the UK government is making updates to the National Minimum Wages regulations, cracking down on employment law breaches and resuming the ‘public naming scheme’. 

What is involved with the public naming scheme?

The objective of the naming scheme is to raise awareness of minimum wage enforcement and deter employers who would otherwise be tempted to break minimum wage law.

This scheme publically calls out businesses who fail to pay their workers the National Minimum Wage (NMW), while increasing support for employers to ensure compliance with the NMW legislation.

Specifically, the government will:

  • increase the arrears threshold over which employers will be considered from naming from over £100 to over £500 (with some exceptions)
  • provide more information about reasons for breaches
  • publish an educational bulletin for employers, highlighting common reasons for underpayment
  • name employers more frequently than previously

The government announced that they are changing regulations to widen the range of pay arrangements available to businesses employing ‘salaried hours workers’ - workers who receive an annual salary in equal instalments for a set number of contracted hours.

Under these changes, workers who are often paid hourly or per day and consequently have different pay checks every month, such as those in the retail industry, can be classified as salaried workers. The changes will provide more flexibility in how salaried workers are paid, without reducing protections for workers. At the same time, businesses employing these workers are less likely to be caught out by the NMW legislation due to the differences in their hours from one month to the next.

Changes include:

  • permitting additional payment cycles for salaried workers, including fortnightly and 4-weekly cycles, providing choice and flexibility to employers and workers
  • allowing employers to choose the ‘calculation year’ fit for their workers, helping them to better monitor the hours worked by salaried workers and identify potential underpayment of wages
  • ensuring salaried workers can receive premium pay, for example for working on Bank Holidays, without losing their entitlement to equal and regular instalments in pay

Additionally, the government has decided that employers offering salary sacrifice and deductions schemes will no longer be subject to financial penalties if the scheme brings payment below the National Minimum Wage rate (which can be up to 200% of arrears).

How do I know I’m paying staff in compliance with NMW?

First of all, you can read more information on who is entitled to the minimum wage. The government is dedicating to provide NMW guidance through the GOV.UK website with guides on compliance issues such as deductions and salary sacrifice schemes.

However, if you want to ensure you’re compliant without the stress of admin tasks, manual calculations or deductions, you might want to assess the capabilities of your payroll software and consider an intelligent software that can automate calculations based on employee setup, and also let you know if you are at risk of underpaying a staff member who is eligible for NMW

KeyPay streamlines NMW compliance

KeyPay is a cloud payroll software built with compliance at its core.

As a cloud-based platform, KeyPay is continuously kept up to date with the latest legislations and compliance needs. By configuring employees on the correct settings with a one-off setup, KeyPay then uses this data to automate calculations and deductions accurately based on government legislation.

An initial setting allows payroll administrators to configure whether an employee is eligible / exempt from the minimum wage.

In the pay run, we then show details on whether the employee is being paid above or below the minimum wage and therefore whether you are compliant with the National Minimum Wages regulations.

KeyPay can also detect things like birthdays, so if for example, an apprentice employee moves into an age group that would require a higher hourly rate, there is no need to remember or to manually update settings. You’ll be given a warning to let you know you might need to review the rates for this employee.

The National Minimum Wage changes are expected to come into force on 6 April 2020, subject to approvals. KeyPay will be up to date with new Tax Year legislation with no requirements to download software updates - something you have to do when using a desktop payroll system.

Kate Brown

Marketing Manager at KeyPay

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