Ross McConnell - Kinross Based Chartered Accountant

Did You Give Your Staff A Bonus Last Friday?

by ROSS MCCONNELL on APRIL 08, 2019

National Minimum Wage Regulations 2015

This morning I have a little quiz for you.

So, hopefully, you will all be aware that the National Minimum Wage and National Living Wage rose with effect from 1st April, to:

· NLW (workers aged 25[plus]) — from £7.83 to £8.21 per hour.

· NMW rates:

  • workers aged 21–24 — from £7.38 to £7.70 per hour
  • workers aged 18–20 — from £5.90 to £6.15 per hour
  • workers aged 16–18 — from £4.20 to £4.35 per hour
  • apprentice rate — from £3.70 to £3.90 per hour

So what happened last week, if you pay your workers a week in arrears?

By that I mean if you paid on Friday 5th April for work done during 25th to 31st March, what rate of pay should you have used?

That’s got you thinking!

Did you pay the right amount last week?

The answer is contained in Regulation 4B of the National Minimum Wage Regulations 2015, which states (not very succinctly) that “the hourly rate of the national minimum wage at which a worker is entitled to be remunerated as respects work, in a pay reference period, is the rate which applies to the worker on the first day of that period.”

Clear as mud? I thought so.

What they’re trying to make clear is that the rate that was in force on the first day of the reference period (in this case 25th March) is the rate that should be applied to the whole of that reference period, even if the rate goes up in the interim.

A pay reference period relates to the period for which the worker is being paid – and pro-rata calculations are not required.

Therefore with a seven-day (one week) pay reference period starting on 25th March, the ‘old’ rate continues to apply even though payment is made after 1st April. The first week – for you – for which the ‘new’ rate will apply is this week, commencing 5st April 2019.

So if you paid the new rate on Friday, then you’ve given your team a bonus!

If you didn’t then you acted legally. But remember, the new rate does apply this week (that’s pay day on Friday 12th), as the new rate is applied to any working period beginning on or after 1st April.

While it might all sound a bit academic, National Minimum Wage investigations are stressful on both businesses and accountants. With stringent rules leaving little room for error, even the most careful of employers can face a long and drawn out investigation with the possibility of penalties of up to 200% if an underpayment is discovered – and being named and shamed at the end of the process can often add to the worry.

That’s why I recommend clients – even those with employing only one person paid on statutory rates – should always take advantage of our payroll support service. It takes care of these issues for you, plus P11D reports on employee benefits, P60 annual statements, not to mention maternity or paternity leave payments, statutory sick pay and all the other paraphernalia that comes with employing even a single member of staff.

They are our most important asset, but you don’t want the administration to become a drain on your time! That’s always better spent on dealing with customers’ needs.

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