Are you ready for the new National Living Wage?
From April 1, UK workers aged 25 and over and not in the first year of an apprenticeship must be paid a minimum of £7.20 an hour, an increase of 50p an hour on the current National Minimum Wage.
The UK government says it aims to enforce the living wage as strongly as the National Minimum Wage, and expects payrolls to have been updated by April 1.
As with the current minimum wage, Her Majesty’s Revenue and Customs have the right to carry out checks at any time and investigate businesses if a complaint of non-compliance is made against them.
If HMRC finds that an employer hasn’t been paying the correct rates, any arrears have to be paid back immediately. There will also be a penalty and offenders might be named by the government.
It’s the employer’s responsibility to keep records proving that they are paying the living wage, and, as with the current minimum wage, most employers use their payroll records as proof. All records have to be kept for three years.
Any payments for the employer’s own benefit, like paying an employee for travel to work, or non-refundable payments by workers like buying tools, uniform, or safety equipment, must not be included when the living wage is calculated.
What is included in the calculations:
- Income Tax and National Insurance contributions
- wage advances or loans
- repayment of wage advances or loans
- repayment of overpaid wages
- things the worker paid for that are not needed for the job or paid for voluntarily, eg meals
- accommodation provided by an employer above the offset rate (£5.35 a day or £37.45 a week)
- penalty charges for a worker’s misconduct
However your eligible employees are paid, by annual salary or piece work, you need to work out their equivalent hourly rate.
Time to ensure your business is ready. Check you know who is eligible in your business. You can check that out on GOV. UK’s employment status page.
Amend your payroll. Find guidance in HMRC’s tutorials.
Let your staff know about their new pay rate.
Check your staff under 25 are earning the right rate of National Minimum Wage, or more.
Maria Williams is a professional blogger, website copywriter, and PR for small businesses. Visit www.wordsyoucanuse.co.uk