Complying with payroll issues from salary to holiday entitlements, payslips to pensions is increasingly important for employers.
The National Minimum Wage and the National Living Wage
Since the establishment of the National Minimum Wage (NMW) in 1999, there have been constant changes to both rates and regulations, with perhaps the biggest
being the introduction of the National Living Wage (NLW) in 2016.
The minimum wage is paid at an hourly rate, with payment bands depending on age, and special provisions applying to apprentices. The NLW is the minimum
wage for those aged 25 and over, whilst the NMW applies to those above school leaving age and individuals aged under 25. For convenience, we refer
to 'minimum wage' to cover both the NMW and the NLW.
Current minimum wage rates
Minimum wage rate Rate from 1.4.19
21-24 year-old rate £7.70
18-20 year-old rate £6.15
16-17 year-old rate £4.35
Apprentice rate £3.90
Failure to pay the minimum wage correctly can lead to penalties. A notice of underpayment will calculate the arrears of pay to be paid and the penalty
set at 100% of the total underpayment, which can be doubled to 200%, unless the arrears are paid within 14 days. The maximum fine for non-payment is
£20,000 per worker, and employers who fail to pay will be banned from being a company director for up to 15 years.
Payslips and holidays
Employees are legally entitled to receive a payslip showing their earnings before and after deductions. However, one in ten workers are not currently receiving
a payslip. This makes it hard for them to calculate whether they are receiving the right level of pay, pension and holiday entitlement, and check Pay
as You Earn (PAYE) deductions.
Around one in 20 workers receive no paid holiday entitlement, despite being legally entitled to at least 28 days' paid holiday a year. In addition, failure
to offer staff workplace pensions under auto-enrolment rules can end in prosecution, with up to two years' imprisonment and unlimited fines possible.
Getting payroll right
Administering payroll and complying with the Real Time Information (RTI) regulations can be burdensome for businesses. The creation of customised payslips
and the effective administration of PAYE, national insurance, Statutory Sick Pay and Statutory Maternity Pay is a time-consuming process. Many small
and medium-sized enterprises (SMEs) may not have the resources or expertise to handle this themselves, but professional payroll services are available.