Leeds-based accountants Thomas Coombs is reminding businesses that the penalties for not paying the new National Living Wage and the minimum wage have gone up from the start of this month.
Whilst the majority of businesses will have focused on making sure their employees are being paid the correct statutory wage, many may not have realised that failing to do so now carries much harsher penalties than before.
Under the changes that have come into force businesses can now be fined 200 per cent of the total underpayment, while pay reference periods that began before 1 April 2016 will still face the previous 100 per cent penalty.
This means business could be fined between minimum payments of £100 up to a maximum payment of £20,000.
This payment applies to each worker who has been underpaid, not the total payment for all workers.
In the most serious cases of non-compliance with the national minimum wage legislation a business owner may be criminally prosecuted by HM Revenue & Customs (HMRC). The potential penalty on conviction is an unlimited fine.
HMRC has also taken a more active role in recent years of naming and shaming the worst offenders, regardless of their size, which could have a significant impact on a business’s reputation.
Stuart Adam, Partner at Thomas Coombs, said: “I suspect the majority of businesses have prepared their payroll to ensure that workers over the age of 25 are now receiving the new National Living Wage of £7.20 an hour.
“However, there may still be some out there that haven’t done this and it is integral that this is rectified immediately to ensure they are not penalised or prosecuted. An effective and carefully managed payroll system can prevent a business ever being penalised and seeking professional advice on setting up such a solution could pay dividends in the long run.”
Stuart Adam added that the National Living Wage is set to go up incrementally to £9 an hour by 2020 and that the national minimum wage for those between the ages of 21 – 24 is also due to go up by 25p to £6.95 this October along with the wages of 18 – 20 which will go from £5.30 to £5.55 per hour.
If you would like assistance with your payroll Thomas Coombs can help. To find out how, please contact Stuart Adam.