National Minimum Wage regulation is about to undergo changes that will affect retailers. John Harding of PwC explains how to stay ahead of the curve.
The National Minimum Wage (NMW) regulations changes present a pressing challenge for retailers. With one in three workers possibly affected, retailers must act now to ensure they are compliant with these new rules before the transitional period ends in April 2022.
Why are the legislation changes being introduced?
The new legislation will provide certainty around payments and reduce some historic NMW risks. However, in the short term, employers need to understand and plan for significant impacts.
The changes mean that more workers will be deemed to be ‘salaried workers’ rather than ‘unmeasured workers’ for NMW purposes. This will affect retailers where workers currently paid in equal fortnightly or four-weekly instalments and/or entitled to an allowance for their basic hours can now be classified as ‘salaried workers’.
For more details, watch our webcast on the changes to the NMW.
“The new legislation will provide certainty around payments and reduce some historic risks. However, in the short term, employers need to understand and plan for significant impacts”
How does this affect retailers?
The main benefit of salaried workers is that employers can continue to pay employees a regular salary for their basic hours over a year without breaching NMW in months where there are more working days than usual. The potential downside is that salaried workers’ allowances paid for basic hours will not be included when calculating NMW. Employers will also need to track the hours worked over a year for these workers, and there are transitional arrangements between now and 2022.
How should retailers respond?
During the transitional period, retail employers will need to:
- identify who is affected by these changes;
- understand what options are available to them going forward;
- pick a definition of a year over which to measure the hours of salaried workers;
- communicate that year to workers with at least three months’ notice;
- deal with any objections and calculate any underpayments in respect of existing salaried workers;
- ensure they have a robust compliance process in place that can track hours and the various calculations required.
There are likely to be operational challenges during the transitional period, so retailers need to act as soon as possible. There are also different rules for new starters.
Do these changes affect new starters?
The new rules will apply immediately to any new starters from April 7, 2020. Employers must act quickly to avoid being non-compliant, as well as any penalties and naming and shaming that goes with that.
Act now to stay compliant
Employers need to think about the impact of these changes and the opportunities and challenges they will bring for their reward strategy, payroll and operations.
What other challenges and opportunities might the year hold for retailers?
While hugely important to retailers, NMW shouldn’t be their only consideration this year.
Our Retail Outlook 2020 looks at what the retail sector might look like in the year ahead, what this means for retailers and how they can differentiate to drive share while balancing operating costs and investing in the future.
John Harding is an employment partner at PwC UK
His contact number is +44 (0)7801 042607
His email is firstname.lastname@example.org