NMW Policy Update April 2020

The Government has issued a new policy paper on the National Minimum Wage (NMW) setting out major changes to the NMW regulations which, is due to come into force from April 2020, read National Minimum Wage Law: enforcement, prosecutions and naming employers who break NMW law.

It is interesting that this is a policy change, not a consultation for review, so it will come into force in April 2020 without revision.  We are pleased that some of the changes introduced in the policy are those which were raised by BUFDG in our response to the Department for Business, Energy & Industry Strategy's Consultation on 'National Minimum Wage: Consultation on salaried workers and salary sacrifice schemes' in 2019.  

The policy covers:

• HMRC enforcement powers
• guidance on the issuing of a Notice of Underpayment (NoU)
• general guidance on HMRC's power not to issue a NoU - this is at the discretion of the HMRC officer, there are no hard and fast rules
• criminal proceedings
• how arrears will be calculated
• penalties, including when they will or won't be imposed - see Secretary of State direction below
• revival of the naming scheme, including:
• increasing the arrears threshold from £100 to £500 (unless previous failures, see Secretary of State direction below)
• additional information on the reasons for the breach
• publication of an employer bulletin highlighting common areas of failure
• naming employers on a more frequent basis

The devil is in the detail (right at the end) - salary sacrifice, savings schemes and deductions

The Annex to the policy paper includes a direction issued by the Secretary of State setting out the 5 conditions that must be met when HMRC consider whether or not to impose penalties upon a NMW breach, summarised as follows:

1.    The payment relates to:

·        an 'opt in' salary sacrifice scheme

·        a voluntary deduction from pay for goods/services provided by the employer

·        a voluntary deduction from pay for savings schemes

2.    The payment is not applicable to accommodation or workers required expenditure (e.g. uniforms)

3.    The employee consents to the deduction

4.    The worker has actually received the benefit

5.    The employer HAS NOT:

·        been convicted of an offence under the NMW Act 1998 which remains unspent

·        been given a labour market enforcement undertaking/order relating to NMW that remains outstanding

·        been served a NoU in the previous 6 years for NMW unless: the payment was less than £500, the notice was withdrawn or rescinded, or the notice is still under appeal

NB This doesn't mean that employees can be paid at less than NMW where they have opted in to a salary sacrifice arrangement, it merely relates to the penalty on that underpayment.  

Other introductions and omissions

Along with the press release announcement that the Government will:

• increase flexibility in how salaried workers are paid by permitting additional payment cycles,
• allow employers to choose the 'calculation year' and
• give employers the ability to pay premium pay without losing any other entitlements

this will give welcomed easements to the HE Sector.  However, it is disappointing that accommodation that has not been provided for work purposes does not fall as part of these easements.  Employer’s who are attempting to ease financial pressures on their employees by offering reduced rent employer owned accommodation, will continue to face difficulties with NMW.

To discuss this further, please contact Julia Ascott. BDO has provided us with this update on the changes, and PwC has provided us with this information flyer on the changes.