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12/02/2020

National Minimum Wage rules to be made more flexible

Subject: Employment law/National Minimum Wage

Source: GOV.UK Department for Business, Energy & Industrial Strategy & HMRC

The National Minimum Wage regulations (NMW) are to be changed in order to introduce more flexibility. The ‘naming and shaming’ policy in relation to employers who breach the NMW will be resumed with modifications.

The changes include:

  • permitting additional payment cycles for salaried workers, including fortnightly and 4-weekly cycles, providing choice and flexibility to employers and workers;
  • allowing employers to choose the ‘calculation year’ fit for their workers,helping them to better monitor the hours worked by salaried workers and identify potential underpayment of wages;
  • ensuring salaried workers can receive premium pay, for example for working on Bank Holidays, without losing their entitlement to equal and regular instalments in pay

The rule changes will help to allow the payment of employee benefits such as premium payments for weekends and over-time working without causing employers to breach the NMW unintentionally. Firms such as Tesco were found to have infringed the rules by introducing “salary sacrifice” schemes whereby some employees paid for contributions to pension plans, childcare or bicycles by forgoing part of their salary. John Lewis plc’s practice of ‘averaging’ monthly wages in order to smooth out peaks and troughs caused by varying hours caused some staff to have been paid below the minimum wage.

The government suspended the ‘naming and shaming’ policy in the summer of 2019 pending a review of the policy. The policy now is to resume the naming scheme but the threshold for naming employers will be raised so that employers who owe arrears of more than £500 in national minimum wage.

The changes are expected to come into force on 6 April 2020 subject to Parliamentary approval. On 1 April the National Living Wage for those aged 25 and above will be increased from £8.21 per hour to £8.72 per hour.

 

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