On 21st November 2023, the UK government announced an increase of the National Minimum Wage by 9.8% to £11.44 an hour, with Apprentices seeing an increase of 21.2%.
With the new wage increases, businesses need to ensure that they're meeting this minimum. In 2023, over 200 businesses were named by the UK Government for not having paid the National Minimum Wage to their employees.
If HMRC finds that the employer has not paid the minimum wage, they may issue a fine of up to £20,000 and a minimum of £100 for each employee or worker affected, even if the underpayment is worth less.
National minimum wage compliance tips
There are a few ways that businesses can ensure compliance with the National Minimum Wage and other employment laws to avoid crippling fines.
1. Understand applicable laws
Familiarise yourself with the National Minimum Wage laws. Minimum wage rates vary based on age and whether the employee is an apprentice, so make sure you're aware of the correct pay for each employee.
2. Regularly check for updates
Just like the new minimum set in November, minimum wage laws can change, so it's essential to stay informed about any updates or changes. Regularly check government websites or consult with legal professionals to ensure you have the latest information. Also, regularly review and update your company's wage and hour policies to align with current laws and regulations.
3. Classify employees correctly
Properly classify employees as exempt or non-exempt based on their job duties and salary. Exempt employees are generally not eligible for overtime pay, while non-exempt employees are.
4. Keep accurate records
Maintain accurate and up-to-date records of hours worked by each employee. This includes regular hours, overtime hours, breaks, and any other compensable time. Then, if your employees' wages were to be assessed, you have all of the evidence.
5. Calculate overtime correctly
If applicable, ensure that overtime is calculated correctly. Overtime pay is typically 1.5 times the regular hourly rate for hours worked beyond the standard workweek.
6. Review wage and hour policies
Regularly review and update your company's wage and hour policies to align with current laws and regulations.
7. Train management and HR staff
Ensure management and HR staff are well-informed about minimum wage laws and compliance requirements. This includes understanding how to handle issues such as overtime, breaks, and recordkeeping.
8. Communicate clearly with employees
Clearly communicate wage and hour policies to employees. Make sure they understand their rights, including overtime pay, break periods, and the minimum wage rate.
9. Seek legal advice if unsure
If you have any doubts about compliance, consult with legal professionals who specialise in employment law. They can provide guidance specific to your business and location.
10. Conduct internal audits
Periodically conduct internal audits to review your payroll and employment practices. This can help identify any potential compliance issues before they become significant problems.
Reducing wage costs
Labour costs are a significant expense for many businesses, and reducing them can positively impact your bottom line. Here are some strategies you can consider to reduce labour costs for your business:
- Optimise staffing levels
Assess your staffing needs carefully to ensure you have the right number of employees in each role. Avoid overstaffing during slow periods and consider hiring temporary or part-time workers for peak seasons or specific projects.
- Improve scheduling and overtime management
Effective scheduling can help you minimise unnecessary overtime and ensure you have the right staff coverage during peak times. Utilise scheduling software and tools to optimise employee schedules and track overtime hours.
- Reduce employee turnover
Retaining employees is often more cost-effective than hiring and training new ones. Invest in employee engagement initiatives, foster a positive work environment, and offer competitive compensation and benefits to reduce turnover.
- Cross-train employees
Cross-training employees to handle multiple tasks can increase flexibility and reduce the need for specialised staff. This can also help you cover for absences and reduce reliance on overtime.
- Automate tasks and processes
Identify tasks that can be automated or streamlined using technology. This can free up employees to focus on more value-added activities and reduce labour costs associated with repetitive tasks.
- Negotiate better rates with vendors and suppliers
Evaluate your vendor and supplier relationships and consider renegotiating rates for services or goods that are labour-intensive.
- Offer alternative compensation structures
Consider alternative compensation structures, such as performance-based pay or profit-sharing plans, to align employee compensation with the company's financial performance.
- Outsource non-core functions
Consider outsourcing non-core business functions to specialised companies. This can reduce labour costs associated with managing and maintaining in-house operations for these functions.
- Leverage technology for employee management
Utilise HR software and tools to streamline employee management tasks, such as payroll, attendance tracking, and performance reviews. This can automate processes and reduce administrative costs.
- Invest in employee training and development
Investing in employee training and development can enhance employee productivity and reduce turnover, leading to long-term cost savings.
Remember that reducing labour costs should not come at the expense of employee morale and engagement. A well-motivated and productive workforce is essential for the long-term success of your business.
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