Reforms to NMW rules

The range of pay arrangements available to firms employing ‘salaried hours’ workers as defined by the National Minimum Wage rules is to be widened.

The category of ‘salaried hours’ under the NMW rules allows for annualised hours and other pay averaging arrangements and has the benefit of paying workers a regular wage throughout the year, even though their working hours may vary. There had been concerns that the NMW rules regarding such workers were out of step with modern pay arrangements. Following a consultation in 2019, the government is proposing three substantive changes to take effect from 6 April 2020. Employers will be allowed to:

  1. pay salaried hours workers in additional equal instalments, such as fortnightly or four-weekly
  2. make premium payments to their salaried hours workers in respect of basic hours, and to allow salaried hours workers’ contracts to specify these premium pay arrangements (these payments will not form part of the workers’ remuneration for calculating NMW pay)
  3. choose their own calculation year for their workers

In addition, the government has stated that rather amending the NMW rules for those employers operating salary sacrifice schemes, it will instead make sure that such employers will not be subject to financial penalties (or the reinstated ‘naming and shaming’ regime, see below) if the scheme brings payment below the NMW rate.

The government will also implement additional non-legislative measures to assist employers in complying with NMW rules. These include:

  • improving guidance available online, including a new thematic guide, with a ‘Guidance Readership Panel’ being convened to review the guides
  • resumption of the Naming and Shaming Scheme, with more frequent naming, although most employers will only be considered where arrears of over £500 are identified by HMRC (those underpaying by less than £100 – the previous threshold - will be able to correct their mistakes without being named and will still have to reimburse workers)
  • proactively supporting small, new businesses, with HMRC conducting visits to educate them about NMW rules
  • providing a support helpline for employers operating deduction or salary sacrifice schemes, with information available directly from HMRC