Why workers lose out on National Minimum Wage: Accountants’ key role in ensuring businesses pay up

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As HMRC announce a new campaign to target hair and beauty businesses that are failing to meet National Minimum Wage requirements, why might businesses still not be paying their employees National Minimum Wage (NMW)?

Why companies slip up

While there may be businesses that will deliberately circumvent NMW rules, underpayment is often down to a lack of understanding of the obligations. For example, oversights can occur when a young employee turns 21, and their pay is not increased.

This goes some way to explain why underpayment is particularly prevalent in the hair and beauty industry, with the suggestion that 42% of businesses are underpaying their staff – the highest of any sector. Commonplace use of trainees, casual staff and apprentices who are under 18 contribute to the high rate – mistakes slip through and employers may not be aware of all their obligations regarding young workers’ pay to begin with.

Hence HMRC and the Department for Business, Skills and Innovation (BIS) have recently announced the campaign, supported by the National Hairdressers’ Federation and the National Hair and Beauty Authority, to work closely with hair and beauty businesses to help them understand their pay obligations to all employees.

Of course, the problem is by no means confined to hair and beauty companies. The care sector and food and clothing retail companies are just some of those being ‘named and shamed’ by HMRC in their ongoing crackdown. Business face fines as well as being publicly listed as non-compliant with NMW laws, detailing exactly how much they failed to pay employees. As HMRC are seen to be working alongside industry bodies, it will have the knock on effect of ensuring other companies clean up their acts before they are targeted.

Enforcing the rules

It is up to the employer and workers themselves to monitor payment. The National Minimum Wage, introduced by the Labour Party back in 1998, is enforced largely by employees reporting their underpayment, by making a contractual claim against their employer, or through a wrongful deduction claim under Part II of the Employees Rights Act 1996. Since October 2013, HMRC have been publishing the names of employers issued with a Notice of Underpayment.

Empowering workers by educating employers

The new campaign is not about trying to catch out small businesses that have made genuine errors. The primary aim is to educate employers, by giving them tailored tools and guidance to ensure payment is correct in the first instance.

And this is where accountants come in. They play a big role in supporting the education of their clients to ensure they are giving staff the correct pay, and do not fall foul of the rules.

Brian Palmer, AAT Tax Policy Advisor says: “With the launch of HMRC’s campaign, accountants who are responsible for client payrolls should be sure to alert their clients. The campaign is an opportunity for employers to self-correct, without having to worry about being sanctioned if they have previously made a mistake.”

As changes to National Minimum Wage continue to come in, it is vital to ensure that business owners are aware and on top of the rules that affect their employees. Because ultimately it’s not just about protecting business owners – the employees who do so much to contribute to their respective companies, industries, and the UK economy as a whole, deserve to get the pay they are entitled to.

Kayleigh is a freelance writer based in Ireland who has written numerous articles for Accounting Technician. She writes on workplace wellbeing and likes to tell inspiring stories about people in business. @Kayleigh_Ziolo


Kayleigh Ziolo is a freelance journalist and writer based in Ireland.

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