Complying with the minimum wage
The National Minimum Wage (NMW) is an important legal consideration for all employers. Current legislation states that a minimum hourly rate must be paid to all employees above the age at which compulsory education ends. From 1 October 2010 the National Minimum Wage was increased to £5.93 for adult workers aged 21 or over. The NMW for workers aged 18-20 was set at £4.92, while those aged 16-17 are now entitled to earn at least £3.64 an hour. A new apprentice rate of £2.50 an hour was also introduced.
The NMW rate is reviewed each year by the Low Pay Commission, and the rate is then set by the government. Changes typically come into force on 1 October each year. It is wise for all employers to familiarise themselves with current legislation in this area, and to make sure that their employees are aware of such issues. Employees with a contract of employment are entitled to the minimum wage, as are freelance workers who are not genuinely self-employed. Home-workers, commission-based workers, workers from outside the UK and British workers working temporally outside the UK are also covered by NMW legislation. There are a few exceptions, for instance for the genuinely self-employed, voluntary workers and trainees on government-accredited schemes. However, there are no exemptions for small businesses, and tips paid to a worker through the payroll are no longer able to be counted towards the minimum wage.
The Labour government has increased the penalties for flaunting NMW legislation in recent years, and the coalition is continuing with this crackdown. From January 1 2011, employers who deliberately breach minimum wage legislation will be publicly named by the Department for Business Innovation and Skills.
Employers must keep records to prove that they are paying their staff at least the NMW. In a dispute at a tribunal or civil court, the burden is on the employer to prove that the minimum has been paid, and an employer that has failed to comply with the legislation will be required to pay arrears.
Employees should be fully aware of their right to the minimum wage and informed of any changes in legislation. It is therefore essential that you review the guidelines at regular intervals.
The following factors should be taken into account when considering the minimum wage:
The age of employees: the legal age at which a person can begin work must be considered when taking on new staff. If the individual is still receiving compulsory education, he or she is not legally entitled to receive the minimum wage. Current legislation on this subject should be consulted. Also, the date when the employee becomes eligible for the minimum wage should be noted.
Paid and unpaid absence: make workers aware of the terms and conditions of employment with respect to illness-related absence and paid and unpaid holidays.
The fairness of the wage: the level of work performed by employees, taking into account responsibility and effort, should be considered when deciding upon the appropriate wage for the workers. Details on pay increases, and how to work towards them should be readily available to employees.