Could your business be accidentally underpaying staff?
Nearly 660 employers have recently been named by the Government for failing to pay staff the National Minimum Wage.
While some recognisable names appear on the list, including B&Q, Five Guys, Merlin Cinemas and G4S, there are also hundreds of smaller businesses.
For business owners, it's a timely reminder that getting minimum wage right isn't always as straightforward as checking the hourly rate on someone's payslip.
How can businesses get minimum wage wrong?
Minimum wage underpayments aren't necessarily the result of a business deliberately choosing to pay someone too little.
There are several ways businesses can get caught out, including:
employees moving into a different age band
apprentices becoming entitled to a different rate
deductions from pay
salary sacrifice arrangements
work-related costs
working time not being accurately recorded
employees regularly working before or after their contracted hours
Individually, these can seem like relatively small details. But if they're not being monitored, they can result in an employee receiving less than they're legally entitled to.
Are you assuming someone else is checking?
Another potential gap is assuming that because your payroll is outsourced, minimum wage compliance is being checked for you.
A payroll provider running your payroll isn't necessarily the same as someone confirming that every employee is being paid at least the National Minimum Wage.
Some providers may simply process the information they're given. They may not be checking age bands, apprentice rates, deductions or whether the working hours recorded accurately reflect the hours someone has actually worked.
It's worth asking your payroll provider directly:
Do you check National Minimum Wage compliance, or do you simply process the payroll information we provide?
We recently discussed this with Lisa Pinney OBE, CEO of the Fair Work Agency, on The HR Podcast. One of the key points from the conversation was that responsibility ultimately sits with the business, regardless of the systems or external providers being used.
Understanding exactly who's responsible for checking what can help prevent gaps from going unnoticed.
What should your business be checking?
Rather than waiting for an issue to arise, businesses should regularly review how pay, working time and employee changes are being managed.
That includes checking:
everyone is receiving the correct minimum wage rate for their circumstances
age and apprentice rate changes are identified at the right time
working hours are being accurately recorded
deductions aren't inadvertently reducing pay below the minimum
managers know what employee changes need to be reported
responsibilities between your business and payroll provider are clear
appropriate records are being kept
pay is reviewed when statutory rates change
You don't necessarily need complicated systems to do this well. You need clear processes, accurate information and people who understand their responsibilities.
How The Fractional HR Department can help
If you're not completely confident about your current processes, we can help you work out where the gaps are.
The Fractional HR Department can support your business by:
reviewing your existing HR processes and working practices
checking contracts and working arrangements
helping identify areas that could create compliance risks
reviewing how employee information is recorded and passed to payroll
helping clarify what your payroll provider does and doesn't check
putting processes in place for age, apprentice and statutory rate changes
helping managers understand what they need to record and report
keeping you informed about relevant employment law changes
It isn't about adding unnecessary processes or making HR more complicated.
It's about making sure the processes you do have work, that everyone knows who's responsible for what, and that you're not relying on assumptions that could leave your business exposed.
Not sure whether there are gaps in your current HR processes?
Get in touch with The Fractional HR Department and we can help you work out what needs attention.