At a glance:
The NMW rates are set for the next six months only and it is expected they will increase again on April 1 2017, along with the National Living Wage (NLW) for workers 25 and over. Doing so will bring the two rates into alignment.
As the NLW increase for April 2017 has not been announced yet, you will need to keep an eye out so you can budget for it in advance. Remember to check the new NLW rates (currently set for £7.20) so you can adjust your payroll well in time.
Paying less than the correct NMW or NLW is unlawful, immoral and not acceptable. Workers are well within their rights to raise a formal grievance with their employers or complain to HMRC. If HMRC investigates and finds you are not paying the correct rate, you will be:
asked to pay back arrears of wages at current minimum wage rates
pay financial penalties of up to £20,000 per worker
From April 2016, the maximum penalty increased from 100% of arrears to 200% of arrears. It can be halved if paid within 14 days.
Most instances of non-compliance with NMW and NLW are not intentional but happen because of administrative errors. As an employer you need to put better controls in place to identify when your workers move from one rate to another. This is the only way you can prevent your organisation from being named and shamed.
As the continued increase in rates affect other wage costs such as national insurance contributions and pensions, it is advisable to factor the necessary changes into your budget.