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Government crack down on minimum wage

North West law firm Maxwell Hodge is warning businesses to be on the ball with minimum wage or face tough financial penalties from February.

Heather Grant, employment lawyer at Maxwell Hodge said: “The government is bringing in tougher sanctions against employers who aren’t found to be paying the national minimum wage with financial penalties of up to £20,000.”

Rules coming into force include businesses being made to pay the arrears of wages to each worker and a financial penalty to the value of 100% of the unpaid wages per worker. This is capped at £20,000. There is also now the prospect of being publicly named and shamed for not paying minimum wage.

Heather warns that it is vital for businesses to get their calculations right. She said: “Paying staff the minimum wage may sound simple but there are some problem areas which can create confusion for companies, particularly in relation to overtime, on call workers and tips.”

Heather offers the following advice: “If you pay overtime, only the employee’s basic rate of pay can be taken into account for calculating national minimum wage. For example, an employee is paid £3.50 per hour basic pay but £5.50 per hour overtime rate. Only the basic rate of £3.50 per hour of overtime will count towards the national minimum wage.

“For salaried workers who are required to work a fixed number of hours per week, overtime is frequently unpaid. Take for example an employee earning a fixed salary of £15,000 per year for a contractual 35 hours per week. Their average hourly rate would be £8.24. If the employee works overtime, taking their actual hours up to 60 per week, their hourly rate would drop to £4.80 and fall below the national minimum wage.

“To avoid these issues, employers should therefore ensure that an employee’s basic rate of pay meets the national minimum wage. Any overtime undertaken by an employee, paid or not, should be recorded and reviewed to ensure that it does not reduce the employee’s hourly rate.”

For “On call” workers, basically employees who need to be at or near their place of work for the purpose of work Heather warns there are some confusing rules to negotiate. She said: “On call hours count as working hours which is something businesses need to be aware of when putting staff on call in a job role, they will need to ensure this then doesn’t end up putting the employee below the minimum wage threshold. However there are also exceptions to the ‘On call’ rule. For example, if an employee is entitled to sleep at or near their place of work and is provided with suitable facilities for sleeping e.g. care workers, then they will only be considered to be working during their waking hours.”

Heather also warns that tips have created problems for clients in the past with some businesses thinking that tips count toward an employee’s wage. “The current legal position is clear, tips cannot be part of an employee’s salary for the purposes of the national minimum wage. This applies regardless of whether tips are paid through the payroll or through a troncmaster. Employers will therefore need to pay sufficient basic salary to meet the minimum requirements.”

She added: “The minimum wage issue can be a minefield and my advice to employers is to ask for legal advice because the penalties for making a mistake are high.”

For more information on employment law and minimum wage concerns contact Maxwell Hodge on 0800 6946 660 or on www.maxweb.co.uk

This was posted in Bdaily's Members' News section by Dan Minchin .