Calibrating Your WFM Solution to Work Within the National Minimum Wage and National Living Wage Regulations

by | Jul 2, 2019

The UK, like most other developed parts of the world, has legislation in place to protect the interests of minimum wage workers. Employers with a significant number of these workers must be particularly focused on complying with these laws, as the penalties for not doing so can be severe. Moreover, it is critical that you assess your workforce management solutions in light of these requirements to minimize any conflicts that might arise.

You can see from the following three scenarios just how easy it might be to inadvertently pay one of your employees less than the legal minimum:

  • Your new time and attendance system has grace and resolution rules. If a minimum-wage employee is seven minutes late, she might forfeit pay for the first 15 minutes of her shift. Therefore, this employee would be paid for 45 minutes when they in fact worked for 53 minutes, or 84.9% of minimum wage.
  • An employee clocks in at 8:32AM for a 9:00AM shift and starts working right away — without your permission. That’s 28 minutes of work that he wouldn’t be paid for, meaning his average pay for the day would be less than minimum wage.
  • A field manager requires that their staff report to the store 10 minutes before their shifts begin so that they’re ready to work immediately when their shifts start.

In any of the above scenarios, your organization could end up in an awkward position and be in breach of minimum wage regulations.

Perhaps you think your contracts are all bulletproof, and you have every clause you need to protect yourself. Maybe the newer contracts have the correct clauses, but what about some of the TUPE’d staff from that chain you acquired two years ago? Or what about employees on older contracts from five or even 10 years ago? And if you’ve got a blind-spot, you’re not alone.

Many companies, including Deutsche Bank, have been accused of not paying employees properly, and in the UK, penalties have doubled in recent years, which is why it’s important to know the rules and play by the book.

The NMW and NLW Regulations

The UK’s National Minimum Wage (NMW) guarantees workers 16 and over a minimum hourly wage between £4.35 and £7.70, while the National Living Wage (NLW) guarantees an hourly wage of £8.21 to those 25 and over. Her Majesty’s Revenue and Customs (HMRC) is the government branch in charge of enforcing this policy, and it requires that companies keep records of pay to prove that they’re adhering to these laws.

Companies that breach the law not only face financial penalties (up to 200% of wages owed for a maximum of £20,000 per worker) and possible prosecution, but can also end up on the government’s “Name and Shame” list — a list of employers who haven’t complied — which, as of 2018, included nearly 180 businesses in the apparel, food, and hospitality sectors. HMRC empowers its compliance officers to seize records from an employer’s work site (with little notice) to review and analyze them for lapses in compliance.

What It Means to Your WFM Strategy

No company wants negative publicity, but the general sentiment is that it’s easy for employers to knowingly or unknowingly shortchange employees. HMRC will investigate and make things difficult if they think you’re an abusive employer. And whether the lapse was intentional or not, employers are still liable for paying arrears on wages and potential punitive fees.

Here are the concrete steps that you can take right now to avoid NMW/NLW conflicts:

  • Understand the impact of your attendance/time policies and whether you are at risk of an investigation. For example:
    • Does your WFM system have any rounding rules?
    • Do your contracts clearly explain any time penalties?
  • Review your absence policies:
    • Has your absence management policy across the business been made clear, or are things left to a manager’s discretion?
    • Do you have a clear way of tracking which employees have acknowledged these policies?
  • Know your clocking procedures and penalties.
    • Does a shift start when the employee punches in, even if he immediately goes to the canteen for 15 minutes before starting work? Or does clocking only begin when a shift officially starts?
    • Restrictions on a clock can stop a worker from showing up and starting work before his shift officially starts, but in the event of a dispute, HMRC is likely to side with the worker and declare that if he’s on the job-site he should be paid for his time.
  • Know your break policies and clocking behaviours around breaks.
    • Do workers get paid during lunch breaks, short breaks, and/or washroom breaks?
    • Do they get paid for breaks not taken?

The irony of having so much technology to manage employees is that it’s easy to prove if you’re in breach of the law. The more data you have on a worker’s attendance hours, the more ammunition the HMRC will have during an investigation. There’s a fine balance to maintain because it’s about much more than HR; it’s about calibrating your rule sets so you don’t run afoul of the NMW/NLW regulations.

Axsium’s experts have decades of hands-on experience in the world’s most complex regulatory environments. We have the knowledge as well as the practical skills to help you determine the processes that are right for you, and to eliminate scheduling or clocking practices that might get you into hot water with the HMRC. We go beyond theory and offer pragmatic WFM consulting services that will help you keep up with changing labour rules and regulations, and reduce the risk of errors, investigations, and fines.

Call or email us to initiate a review of your WFM practices, policies, and procedures.

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