Changes to National Minimum Wage rules from April 2020

By Elizabeth Lang, Alison Dixon

02-2020

The government will resume calling out businesses who breach National Minimum Wage legislation.

From 6 April 2020, the government will reintroduce the practice of publically naming and shaming businesses that do not pay their workers the National Minimum Wage ("NMW").

The scheme was suspended in 2018 for review and will therefore undergo some tweaks and changes in April 2020 such as:

  • Increasing the threshold for naming and shaming. Businesses who owe their workers more than £500 in NMW payments will be publically named. Under the previous scheme, the threshold was £100; and
  • Naming rounds occurring more often so that the scheme will have a more potent effect on non-compliant businesses.

More pay arrangements for salaried hours workers

Under the NMW rules, employers must categorise their workers as one of four options, one of the more common of which is 'salaried hours' worker.
Before April 2020, only roles where employees are paid an annual salary in equal weekly or monthly instalments for a set basic number of hours each year count as 'salaried hours' workers. Certain other conditions also apply including not being entitled to premium pay or other payments other than salary and any performance bonus. The significance is that employers are still compliant where workers receive less than the NMW for hours actually worked in a pay period provided the minimum is met for the 'calculation period'.

On 6 April 2020, the government plans to broaden the rules and make things easier for both workers and employers by:

  • Broadening the definition of 'salaried hours' work to include other payment arrangements such as fortnightly and 'four-weekly' instalments;
  • Allowing salaried workers to receive 'premium pay' for working on certain days such as bank holidays; and
  • Allowing employers to choose their own calculation year, making the system more flexible and making it easier for employers to monitor their workers.

Changes to NMW and salary sacrifice schemes

Salary sacrifice schemes, where an employee willingly accepts a reduced salary in return for a benefit, will also be affected by the changes to the NMW rules.

Before April 2020, where a salary sacrifice scheme will have the effect of lowering a worker's wage below the NMW threshold, the employer will be treated as having underpaid the worker.

Although this will still be the case from 6 April 2020 onwards, where a salary is below the threshold due to a salary sacrifice scheme, the government will neither issue financial penalties, nor publically name the company. The company will be required to pay back any arrears and it will still be necessary to comply with the NMW rules.

Other changes

The government has also promised to continue to support businesses to help them comply with NMW rules. This includes future action such as improving NMW guidance, visiting new small business and providing a support helpline.