Employers: Risk-Assess Your Minimum Wage Payment

New minimum wage rates took effect from 1 April 2022. There is, however, much more to minimum wage compliance than simply taking an annual increase on board.

HMRC checks

HMRC carries out checks on employers as part of its compliance procedure, visiting business premises to inspect records and to engage directly with workers to make sure they’re receiving what is legally due to them. Employers are selected for checks either because of HMRC research, which might alert it to potential issues within a particular sector or local area, or because it’s had a complaint that employees are being underpaid.

Risk zone

Minimum wage legislation used to be something that mainly impacted lower-paid employees. The net has since widened considerably. With the minimum wage rate for those aged 23 and over now at £9.50 per hour, the number of employees with pay at about this level will be significantly increased. We recommend monitoring the position even for employees with pay above the minimum, to ensure there’s nothing that would tip their pay below the required threshold.

Deductions from wages are a particular danger area. It is permissible to make a deduction for accommodation taking pay below the minimum wage, but the maximum is determined by what is called the accommodation offset.

Other deductions, even if agreed with workers and of benefit to them, are illegal if they reduce pay below the minimum wage. Salary sacrifice arrangements, for instance, need care: it’s the figure after the sacrifice that has to be checked against the minimum wage.

We can help you review minimum wage compliance. Please don’t hesitate to get in touch.