NATIONAL MINIMUM WAGE CHALLENGES FOR THE HOSPITALITY SECTOR AND HOW TO ADDRESS THEM

Transcription

1 NATIONAL MINIMUM WAGE CHALLENGES FOR THE HOSPITALITY SECTOR AND HOW TO ADDRESS THEM Billy Waters, Solution Architect, Fourth. Richard Harvey, Partner, GQ Littler Raoul Parekh, Senior Associate, GQ Littler 7/03/2017 UK: +44 (0) US: Europe, Middle East & Africa: Australia: Internal

2 AGENDA Introduction NMW Challenges for the Hospitality Sector How Technology Can Help Questions & Answers

3 NMW Guide Developed in conjunction with GQ Littler Available to download from: fourth.com/resources Will include a link to the guide in a follow-up

4 The specific challenges hospitality operators need to address to ensure compliance with NMW legislation. Richard Harvey, Partner, GQ Littler Raoul Parekh, Senior Associate, GQ Littler UK: +44 (0) US: Europe, Middle East & Africa: Australia: Internal

5 Agenda Introduction to Minimum Wage Why talk about the Minimum Wage now? The challenges for the hospitality sector Round up and final thoughts

6 Introduction to NMW A quick reminder Minimum level of pay for all workers - introduced in 1998 by the Minimum Wage Act. Updated periodically to amend rates applicable. In 2015, George Osborne introduced the National Living Wage. This was a new band for workers aged 25 or above. Led to a sharp rise in the rates from April 2016 onwards. Currently 7.50 per hour, rising slightly to 7.83 in April NMW CPI increase only

7 Introduction to NMW Why are we talking about it now? 1/2 Since 2016 increase, far more people are now on minimum wage 1m people were on NMW in 2015; 2016 estimates predict more than 3m by Full compliance with NWM is not easy; far simpler to have headroom for errors. Now, fewer employers have that comfort. Source: House of Commons Briefing Paper Number 7319, 24 March 2016

8 Introduction to NMW Why are we talking about it now? 2/2 Change in compliance landscape: HMRC becoming more active with its enforcement powers. Different and additional risk to normal employment law compliance issues. New name and shame powers announced in 2013 now presumption in favour of being named: Year to April 2017: 2,600 businesses investigated 10.9m of underpaid wages identified for more than 98,000 workers Enforcement strategy published in November 2017.

9 Introduction to NMW How is it enforced? 1. By employees Employment Tribunal claim within three months of last underpayment, with two year cap on back payments. No fees for employees and generally no risk of paying employer s fees if they lose. Civil court claim within six years of the underpayment. More expensive and risk of having to pay employer s fees in some cases if they lose. Protection from dismissal/detriment as a result of complaining about underpayment of minimum wage. 2. By HMRC Strong investigatory powers to demand documents, inspect premises etc. Power to issue a notice of underpayment requiring an employer to repay arrears of minimum wage plus a financial penalty to the government. Penalties of up to 20,000 per underpaid worker. Can sue on behalf of workers if employer does not comply with the notice of underpayment. Naming and shaming is standard practice. Criminal prosecution also possible unlimited fines, including on officers of companies.

10 Challenges: 1 Honey, I underpaid the kids Different bands apply for different ages Employee s entitlement can change during a shift National Living Wage Standard adult rate Development rate Young workers rate Apprentice rate Age 25+ Age 21+ Age Age April 2017 March 2018 April 2018 March

11 Challenges: 2 Travel time: does it count? Often tricky to monitor in practice Commuting to and from work will not be working time for NMW Required travel during working hours will count for NMW

12 Challenges: 3 Tip me baby, one more time Tips don t count for NMW purposes May get favourable NICs treatment but still no help for NMW

13 Challenges: 4 Dress codes and wage woes Uniform costs must be deducted from pay before checking minimum wage compliance. This applies even if your uniform is just a generic dress code. Extract from HMRC National Minimum Wage Manual: Example 3: A hairdresser requires workers to wear a uniform consisting of any black trousers and any white tee shirt. Workers can purchase these from any shop. The cost of purchasing these items will reduce National Minimum Wage pay, since it is a specific requirement imposed on the worker by the employer.

14 Challenges: 4 Dress codes: An example James is 26 and works as a waiter for 7.60ph for 40 hours per week. His employer says he must wear black shoes, black jeans and a white shirt to work. He works for a week and is then dismissed after failing to turn up for a shift without any explanation. He complains of underpayment of minimum wage: 40 hours 7.60 = jeans/shirt/shoes costs = 264 net wage 264 / 40 = 6.60ph effective rate of pay i.e. below 7.50ph NMW, so employer in breach

15 Challenges: 4 Dress codes: what to do? Important to allow a buffer if you have a dress code which will potentially be caught by these requirements. Mitigation strategy how much is reasonable to cover uniform? Not uncommon to be in breach and HMRC are focussing on this issue.

16 Challenges: 5 What s past is prologue Onerous record keeping requirements. Employees can inspect on demand. Presumption you have underpaid if you can t prove otherwise.

17 Challenges: 6+ Do sweat the small stuff There are lots of other compliance issues you have to get right 100% of the time They include: Pay reference periods Changes to rates of pay and other regulatory changes Rounding time up/down Unpaid trial shifts Living accommodation

18 To summarise HMRC much more likely to investigate Consider carefully the effect of any uniform requirement Tips generally won t affect the NMW position Keep meticulous records Beware of the varying limits with age

19 Richard Harvey Partner T: M: E: Raoul Parekh Senior Associate T: M: E:

20 How technology can help with NMW compliance. Billy Waters, Solution Architect, Fourth UK: +44 (0) US: Europe, Middle East & Africa: Australia: Internal

21 Who gets NMW? ENTITLED NOT ENTITLED Agency Workers Full Time Genuinely Self Employed Disabled Workers Part Time Non Exec Directors/Consultants Apprentices Temporary Staff Volunteers Trainees Casuals Under School Leaving Age

22 Types of work in hospitality Paid by the hour Paid an annual salary Time Work Salaried Hours

23 Working time includes At work or on standby Not working because of machine breakdown Waiting to collect goods or meet someone Travelling in connection with work If you have to be on the premises then it is working time Training or travelling to training At work under certain work related responsibilities

24 Working time does not include Travel between work and home Away from work on rest breaks Not working but at the workplace

25 What counts as pay Salary/Wages Child Care Vouchers Bonuses Tips & Service Charge Commission Incentive Payments Overtime National Minimum Wage is calculated over a Pay Reference Period Provision for Accommodation

26 What is a pay reference period? The length of time for which a worker is paid For example weekly or monthly Cannot be longer than a month

27 Deductions A deduction cannot reduce employees wage below minimum wage rates Deductions for uniform or payments for uniform Accommodation (above off set) Deductions made for the employers own use or benefit

28 Deductions that do and don t Reduce pay for NMW Tax and National Insurance Student Loans Deductions toward a loan repayment Pension Contributions Deductions to cover previous accidental overpayments Deductions made in respect of employee s conduct that are allowed for in the contract of employment Salary Sacrifice Under a genuine salary sacrifice, the worker sacrifices an amount of cash pay in return for a benefit in kind. With the exception of employer-provided living accommodation, benefits in kind do not count for NMW/NLW purposes so the lower amount of pay (i.e. after the sacrifice) is used for calculating NMW/NLW.

29 Common mistakes Not paid for trial shifts Status of worker Apprentices and training Not paid for standby shifts Rounding minutes to the nearest 5 mins Unpaid for additional hours worked Travel time and standby shift Not paid for staff meetings and training Not paid for changing into uniform Not keeping accurate records

30 How can the Fourth solution help? Configuration: Set up pay bandings in job titles Exclude payment types from NMW calculation where applicable Apprentice functionality Auto deduct breaks Process: Run NMW / NLW batch update before each pay run Run the NMW / NLW export in payroll Ensure all hours are recorded correctly in the rotas Schedule employee breaks Define Working Time Accurate record keeping: Time and attendance

31 Time and Attendance Benefits A biometric solution ensures it is the employee that clocks in and out Gives visibility of when the employee arrives and leaves compared to their scheduled shift time and paid time Thresholds can be set to manage the acceptable time an employee arrives in the business before or after their shift Rota times can easily be updated to reflect clock in and out times Comments or notes can be recorded when a time is changed Provides evidence in the event of a dispute over payment

32 Best practice Rotas should be scheduled and approved in advance of the rota start date Breaks should be planned and therefore scheduled in Ensure all employees are clocking in and out on every shift Salaried staff must also clock in and out to ensure accurate records of working times are kept T & A should be reviewed and hours updated daily to ensure the employee is paid for every minute they worked Copy T & A will ensure clock in times match paid hours If Copy T&A is used, ensure only working time is paid and add a note/comment if amended. Rotas should be rolled back to include any forgotten hours

33 Living accommodation and NMW I provide free living accommodation to a worker. How does this affect the NMW/NLW? Where you provide living accommodation to a worker free of charge, the amount of the accommodation offset counts when calculating a worker s NMW/NLW pay. I provide living accommodation to a worker. I charge them a week which they pay via a deduction from their pay. How do I calculate the worker s pay for NMW/NLW purposes? Living accommodation provided by an employer to a worker is the only benefit in kind which counts towards a worker s NMW and the NLW pay. A notional amount, called the accommodation offset, counts towards a worker s NMW/NLW pay. If the amount you charge a worker is equal to, or less than, the amount of the accommodation offset, the amount you charge the worker for the accommodation has no effect when calculating a worker s NMW/NLW pay.

34 Living accommodation and NMW I provide living accommodation to a worker for which I charge per week. How does this affect the worker s pay for NMW/NLW purposes? Living accommodation provided by an employer to a worker is the only benefit in kind which counts towards a worker s NMW and the NLW pay. A notional daily amount, called the accommodation offset, is allowed to counts towards a worker s NMW/NLW pay. If the amount you charge a worker is more than the amount of the accommodation offset, the worker's pay is reduced by the amount that the charge exceeds the amount of the accommodation offset.

35 Further Reading National Minimum Wage Guide, from GQ Littler and Fourth Fourth Customer Community (fourth.com/customer) Release note NMW/NLW Compliance export (Past pay period) Release note Apprentice functionality Using National Minimum/Living Wage Batch Update Using Time and Attendance Rota Module HMRC NMW technical manual is now available via GOV.UK. It can be found at: The National Minimum Wage and National Living Wage

36 THANK YOU Questions and answers. Thank you for watching! If you have any questions, please send them to and we ll get back to you as soon as possible. For details on other Fourth webinars and events, please visit: fourth.com/events For recordings of previous Fourth webinars and other resources, please visit: fourth.com/resources