There is now a new method of circulating underpayment of NMW. It means that the higher rate of NMW could be paid for the entire period of underpayment if there has been an increase in the NMW.
The formula for this is: (A/R1)*R2 where:
A = amount underpaid in given period, i.e. the difference
R1 = NMW rate applied at the time of payment
R2 = NMW rate currently applied
The amount paid needs to be checked. First the underpayment needs to be calculated.
Then the formula needs to be carried out. If the formula creates a total that is higher than the underpayment then this is the amount paid.
N.B Remember if the NWB changes between the date you calculate the arrears and the date the worker is repaid the arrears, then the calculation needs to be redone.
There is also a change to the penalties that be incurred due to underpayment.
If an employer fails to repay within 28 days of an employee’s notice, they will be liable to pay a financial penalty of up to half the total amount of underpayment. There is no longer a penalty notice imposing the financial penalty as this is included within the initial notice of underpayment. The penalty fines are set at £100 to £5000 max. If there is a failure to comply the employer can be taken to Crown Court where the fine is unlimited.
For further information about age discrimination legislation or employment law advice please call 0161 785 2000.
