The Employment Act 2008, which comes into force on April 6, will introduce harsher penalties for employers who fail to pay their staff the National Minimum Wage (NMW) and this will require employers to review their wage systems.
A high percentage of investigations by the HMRC Compliance Unit in Northern Ireland show non-compliance by employers.
In 2007-08 the Belfast Compliance Team found 68% of employers who were investigated were not paying the NMW.
This resulted in arrears being payable to 566 workers in Northern Ireland during that year alone.
Since the introduction of the NMW legislation in 1999 around £30m of arrears has been identified for workers across the UK with over £2.8m of this being paid to 6,481 workers in Northern Ireland.
The legislation includes a new method of calculating arrears of wages due to underpaid workers and an automatic penalty of up to £5,000 for those employers who are caught not paying the NMW. The legislation also gives HMRC greater powers to enforce the legislation. Prior to this employers who were found not to be paying the NMW were ordered to repay their staff the arrears of wages owed to them at the NMW rate which was in force at that time.
If the arrears were paid no further action would be taken. The new legislation means that arrears will be repaid at the current rate of NMW where the rate is higher than the rate that applied when the arrears rose.
The aim of this change is to ensure that the amount of arrears payable to workers takes account of the length of time that they have been outstanding.
In addition employers will also incur a penalty which will be payable to HMRC and which will be set at 50% of the total underpayment figure subject to a minimum penalty of £100 and a maximum of £5,000.
Employers are legally required to keep sufficient records showing compliance with the NMW requirements. It is a criminal offence to fail to do so and HMRC has the power to award arrears of wages to workers dating back to six years and even in cases where the person no longer works for the employer.
Common problems which arise during compliance investigations are deductions for accommodation, uniforms or transport, payment of bonuses and tips and apprenticeship training programmes.
Even the simple mistake of missing the increase in NMW on a worker’s 16th, 18th or 22nd birthday could lead to penalties under the new legislation.
By way of a reminder the NMW increased again on October 1, 2008 so that workers aged over 22 years old are now entitled to £5.73 per hour. Workers aged 18-21 should receive £4.77 per hour and 16 and 17 year olds are entitled to £3.53 per hour.
Further help on all aspects of the NMW for both employers and employees is available, in confidence, from the NMW Helpline operated by Citizens Advice on 0845 6500 207 or by visiting the website at www.nmwadvice.co.uk
Siobhan Harding is an Information and Policy Officer with Citizens Advice