National Minimum Wage – is it just too difficult to get it right?

Karen Weston, Senior Manager at Aspire, blogs on the difficulties that employers face in maintaining compliance on National Minimum Wage legislation.

On 5th August 2021, Government issued a new list of 191 companies which had been identified as failing to pay the National Minimum Wage (NMW) or National Living Wage (NLW).  Notably the list referred to breaches which occurred from 2011 to 2018, which has to raise the question of the validity of this information being published 3 to 10 years after the event and somewhat undermines the purpose.    

Whilst it is vital to protect worker rights and ensure that they are paid correctly this ‘naming and shaming’ exercise falls short of giving any valid information of how the error occurred and what employers need to do to avoid making the same mistakes.

During November and December 2020, workshops were held by the Office of the Director of Labour Market Enforcement to discuss strategy for development of the Single Enforcement Body.  NMW/NLW enforcement was a hot topic.  The following was noted as one of the outcomes;

A senior officer from the NMW team who was present commented that employers have little hope of ensuring their compliance with NMW legislation because of the complexity of the regulations. 

Notably, the role of Director of Labour Market Enforcement fell vacant when interim director, Matthew Taylor’s tenure ended in January 2021.  Despite his offering to remain in the role on a voluntary basis this was not taken up and, to date, the outcome of the recruitment exercise for the role has not been finalised.  This is the report of “progress” to date;

It seems inherently unfair that, in a climate where it is recognised that NMW legislation needs wholesale amendment and simplification, there is no remit in place to address this and yet, the naming and shaming of employers, potentially causing reputational damage to their business, continues.   
Whilst it should be simple to ensure that an employee’s hourly rate is at or above the appropriate NMW/NLW rate, employers need to take care to ensure that they do not fall foul of the legislation.  Common problems include workers not being paid for all work time, an obligation on workers to purchase items which should be provided for free if they are a requirement of the employment and deductions being made from pay which cause a breach of the NMW/NLW.

I hold that it is a small minority of employers who would intentionally underpay their employees, but the complexity of the legislation and lack of supporting guidance mean that many can fall foul of the law accidentally.  Government is aware of this but seems to be doing nothing to improve the situation and, with this being the case, it seems likely that more employers, despite acting in all innocence, will be at risk of being named and shamed. 

There are many factors to consider when paying workers. It is vital that you take action to ensure that you are correctly paying the NMW/NLW that is due and complying with all of your obligations as an employer.

If you are concerned about whether you are meeting your obligations as an employer, to ensure you are compliant with your obligations and avoid the financial and reputational risk of being on the next name and shame list, give Aspire a call on 0121 445 6178.