Minimum Wage Challenges Mounting

Minimum Wage. Living Wage. Salaried workers. Unmeasured Workers. Calculation Years. If you feel that minimum wage regulations and the practicalities of their implementation are complex, we wouldn’t argue, and they’re becoming more so, in particular for businesses working across multiple European jurisdictions.

No Commonality

Significant challenges arise for organisations as a result of diverse approaches to minimum wage across Europe. For example, six EU nations have no minimum wage legislation at all, while the remaining 21 have requirements ranging from €332 per month (Bulgaria) to €2,202 per month (Luxembourg). By comparison, the UK’s National Living Wage, applicable to employees aged 25 and over, equates on a 40 hour week to a little over £1,400 per month *.

Such disparities in required minimum wages raise complexities for your payroll department, especially if you operate in a number of European nations. However, challenges arise in connection with other aspects of minimum wage regulations, too.

UK Changes

In February 2020, the Department for Business, Energy and Industrial Strategy (BEIS) announced changes to the UK’s National Minimum Wage, due to take effect and impact organisations from next April.

These measures will change the criteria by which you determine whether each of your employees is a “salaried worker” or an “unmeasured worker” – it’s likely that many of your employees who were previously unmeasured workers will become salaried workers. Your payroll department may as a result need to devote more resource to the calculations and other work needed to ensure minimum wage reporting compliance.

Where the Buck Stops

As with other aspects of minimum wage compliance, responsibility for correctly identifying employees as either salaried workers or unmeasured workers will rest with you, the employer. With the new regulations taking effect in less than 12 months’ time, it is key now to begin assessing your situation and how the changes will affect you. You will need to create and implement a plan to address the new requirements, communicating your intentions clearly and transparently with your workforce, well in advance of the April 2022 deadline.

Failure to do so could lead to compliance failures, exposing your business to significant brand and other reputational damage, increased operational costs, degraded employee morale, productivity and retention, and, of course, statutory fines and other penalties. Just a few months ago, various employers, including household names such as Tesco and Pizza Hut, found themselves “named and shamed” by the UK government as having failed to pay employees the required minimum wage.

The Benefits of Compliance

Getting minimum wage compliance right, however, can contribute to improved employee morale and retention, as well as enhanced credibility, productivity and financial results.

Find out more about the UK’s minimum wage changes and the complexities faced by organisations operating across multiple European nations by downloading our white paper, Evolving Compliance Considerations Across Europe.

And, hear details of the new NMW legislation from employment experts PwC by watching our webinar on-demand from 27 April 2021, National Minimum Wage Compliance.

 

* January 2021 figures

 

Published: Thursday, 6 May 2021