Minimum wage non-compliance is on the rise – here’s what you can do about it

New research from the Resolution Foundation reveals that a quarter of minimum wage workers under the age of 25 are being underpaid.

This is based on figures which show that in 2018-19, HMRC undertook over 3,000 investigations, identifying over £24.4m in underpayment for more than 220,000 workers.

The government is taking a stronger stance on enforcement to ensure everyone who is entitled to receive the National Minimum Wage is paid with complete accuracy. All businesses are liable for this, regardless of their size and sector, and if found to be in breach of the law can face fines of 200% of the arrears – and even criminal prosecution.

This research comes at a time when minimum wage rates are set to rise again in just a few months’ time, with the following changes in effect from April 2020:

• National Living Wage (25-years old and up) – Up 6.2% to £8.72
• National Minimum Wage (21-24 years old) – Up 6.5% to £8.20
• National Minimum Wage (18-20 years old) – Up 4.9% to £6.45
• National Minimum Wage (Under 18 years old) – Up 4.6% to £4.55
• Apprentices – Up 6.4% to £4.15

John Petter, CEO of Zellis commented: “In our experience, few companies deliberately try to avoid paying the national minimum wage, but it can be all too easy to accidentally do this. This is a complex area and the strongest safeguard is systemising compliance using software that runs these minimum wage checks automatically. Zellis offers this functionality as part of its software suite.”

At Zellis, we’ve taken steps to support our customers with their minimum wage compliance by developing new functionality for ResourceLink, our award-winning payroll and HR software.

ResourceLink enables users to run reports at individual and various group levels to identify any employees who may have fallen below the minimum rate for their age group. These checks will issue an automatic warning which prompts the payroll team to take corrective measures before the payroll is finalised.

Jaspal Randhawa-Wayte, Director of Product Management, Payroll Solutions added: “There are many layers of intricacy to the minimum wage rules. For example, since 2020 is a leap year, employees are technically working an extra day. If they receive a fixed rate of pay (as many employees do), this extra day could inadvertently take their hourly rate to below the National Minimum Wage unless the right precautions are taken.”

“These types of occurrence are where companies can trip up, but they can be avoided with the right solutions in place. In this case, ResourceLink allows you to amend ‘the weeks in year divisor’ in the calculation to factor in the extra day.”

Learn more about the ways you could breach compliance with national minimum wage rules.

Zellis also provides Managed Services to help organisations run their payroll operations with consistent compliance, greater accuracy and efficiency, and reduced costs – all backed by the UK’s #1 payroll and HR software.

To find out more, get in contact today.