Pay reference periods and National Living Wage

You may recall the recently reported £36m dent in John Lewis profits due to a payroll error and potential breach of the minimum wage rules. In view of the costly paybacks, not to mention fines – doubled in 2016, how can one ensure compliance?

The rules and regulations surrounding the minimum wage are complex and their exact application will depend on your individual circumstances, how you run your payroll and your HR practices. When even John Lewis has shown not to be immune to falling foul on the minimum wage rules, it would be best to seek specialist legal advice if you have any concerns.

It would appear that all that needs to be done is to calculate the hourly rate of your staff and then make sure it does not go below the specified minimum wage, which from 1 April 2017 is £7.50 per hour for workers who are at least 25 years of age. So far, so simple. The hourly rate, however, cannot fall below the minimum amount within any reference period. What would be the relevant reference period and how exactly hourly rates are calculated are the pitfalls to beware of and which Lawgistics can navigate you through.

Authors: Kiril Moskovchuk

Published: 26 May 2017


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