Minimum wage increase – are you compliant?

As of 1st October 2014 the National Minimum wage (NMW) has been increased by 19 pence per hour, bringing it to £6.50 for those aged 21 and over. Employees aged between 18 and 20 have had a slightly smaller raise to £5.13, up 10p from last year. There have also been minor increases for employees aged under 18 and for apprentices.

Government estimates suggest that over a million employees will be up to £355 a year better off after the minimum wage increase.

For employers there are a few things to bear in mind following the change. Firstly, the fine for failing to pay employees at the new rate could attract a fine of £20,000 for each underpaid worker. Businesses will need to carefully check payroll records to ensure that:

• The hourly rates have been correctly updated for every employee
• Any underpayments are rectified in the next payroll run

The quicker that any problems are rectified, the smaller the impact on company finances and the less likely you are to be prosecuted.

The second change relates to the way in which HMRC can deal with businesses flouting NMW rates. Since October 2013, the tax man has had the powers to ‘name and shame’ firms failing to pay employees correctly. There have only been 25 examples of this power being exercised since last year, but there are promises that more companies will be named in future.

The financial and reputational damage caused by under-paying employees should serve as a warning to comply with the minimum wage increase immediately.