HR · 30 September 2016

Blunt warning for small businesses not paying National Minimum Wage

national minimum wage
The new National Minimum Wage rates represent the largest increase since 2008

With the government announcing a boost to the rates of the National Minimum Wage – providing a pay rise for 500,000 workers in Britain – it has also urged business owners to check their payrolls and avoid financial penalties.

In a stark warning to business owners, the government said: “Employers who fail to pay are found and punished, as well as being publically named and shamed.”

The following increases to National Minimum Wage rates have been announced:

  • £6.95 per hour for 21-24 year olds – an increase of 25p
  • £5.55 per hour for 18-20 year olds – an increase of 25p
  • £4 per hour for 16-17 year olds – an increase of 13p
  • £3.40 per hour for apprentices – an increase of 10p

The new rates represent the largest increase since 2008, outstripping both average wage growth and inflation, and follow recommendations by the independent Low Pay Commission.

The government has tightened its grip on non-compliance by increasing HMRC’s budget to £20m – an increase of £7m – to aid revenue and customs in targeting business owners not paying their staff the national minimum and living wages.

Alongside the boost to the National Minimum Wage, the government has introduced a series of measures to support small firms in adopting the increase, specifically to the Employment Allowance and Small Business Rate Relief.

The Employment Allowance – available to employers paying class 1 National Insurance – has been increased from £2,000 to £3,000. The government has claimed that the measure will take 90,000 employers out of National Insurance contributions, and benefit a total of 500,000 firms.

The government has also announced that the doubling of Small Business Rate Relief will extend until April 2017, taking 405,000 firms out of paying any rates at all, with a further benefit to 195,000 businesses.

In a statement, business secretary Greg Clark said that the government remained committed to making the rise in the National Minimum Wage work for employers as well as workers.

“The government is committed to ensuring the National Minimum Wage works for both employees and employers, which is why we continue to work with business to create an environment in which they can thrive,” Clark said.

Employers may be concerned over the boost to the National Minimum Wage after findings from a survey conducted by the Federation of Small Businesses highlighted the impact of the National Living Wage on small business.

According to the survey, rising labour costs as a result of the National Living Wage were a major financial concern for a majority of small business owners. Of those surveyed, some 59 per cent claimed that in order to meet the legal obligations of the NLW they had to reduce their margins, or “simply absorb the cost”.

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ABOUT THE EXPERT

Simon Caldwell is a reporter for Business Advice. He has a BA in politics and communications from the University of Liverpool, and previously worked as a content editor in the ecommerce industry.

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