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Increases in National Minimum Wage

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The announcement in this week’s Budget of increases in the National Minimum Wage comes at a time when small businesses are already facing increased costs as a result of pensions auto-enrolment.  Businesses have already seen the withdrawal of reimbursement of Statutory Sick Pay (SSP) payments and the overall effect on profit margins will be significant for businesses in certain sectors.

The National Minimum Wage was brought into force in 1998 by the Tony Blair administration and was opposed by the Conservative party at the time. However since then, the National Minimum Wage has become bedded into business as a minimum payment level.  Enforcement of a failure to pay National Minimum Wage rates is brought by a free standing investigation by HMRC and can result in fines and a naming and shaming of businesses which are found not to comply.  It is not possible to contract out of the National Minimum Wage, although some deductions are allowed, for example, where accommodation is provided with the job.

Pensions Auto-enrolment duties now apply to all businesses which employ staff.  This will cover businesses with a single employee.  The requirement for businesses to provide pensions is being phased in on a staged basis but will result, by October 2018, in all businesses needing to contribute 3% of qualifying earnings into a qualifying scheme.  Pensions Auto-enrolment is particularly complicated for low earning employees.  A failure to make pensions contributions can result in fines from the Pensions Ombudsman and can also result in claims to the Employment Tribunal by employees for failure to pay the correct amounts.

If you would like any help or advice with the changes to the National Minimum Wage, please contact our Employment team.

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