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Failure to pay minimum wage costs firms

Businesses that failed to pay staff the national minimum wage have been forced to pay back more than £2 million in unpaid salary.

In addition to paying workers back money they owed, 233 employers on the government’s ‘named and shamed’ list were fined £1.9 million.

The national living wage is currently £7.50 an hour for employees over the age of 25, and £7.05 an hour for those aged between 21 and 24.

The Department for Business, Energy and Industrial Strategy said retail, hairdressing and hospitality businesses were among the worst offenders.

Common errors made by businesses include:

  • deducting money from salary to pay for uniforms
  • failure to account for overtime hours
  • wrongly paying apprentice rates (£3.50 an hour for under-19s or those in their first year) to workers.

Margot James, business minister, said:

“It is against the law to pay workers less than legal minimum wage rates, short-changing ordinary working people and undercutting honest employers.

“Today’s naming round identifies a record £2 million of back pay for workers and sends the clear message to employers that the government will come down hard on those who break the law.”

Melissa Tatton, director at HMRC, added:

“HMRC is committed to getting money back into the pockets of underpaid workers, and continues to crack down on employers who ignore the law.

“Those not paying workers the National Minimum or Living Wage can expect to face the consequences.”

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National living wage affects SME profits

Over half (64%) of small businesses are seeing profits dip as a result of the latest national living wage (NLW) rise, according to a study.

The NLW increased from £7.20 to £7.50 per hour on 1 April 2017. 

The Federation of Small Businesses (FSB) polled 835 businesses and found 39% have put up prices to cope with the wage increase.

A further 24% have either cancelled or scaled down investments, while 22% reduced working hours or hired fewer staff.

Additionally, 43% had to increase wages in line with the NLW, suggesting that the majority of owners are already paying their workers above the new rate.

Mike Cherry, national chairman at the FSB, said:

“Small businesses owners have demonstrated their resilience in meeting the challenge set by the NLW, with many cutting their margins, or even paying themselves less, to pay their staff more.

“In sectors where margins are tight, small firms are resorting to more drastic measures to cope with the NLW. Therefore it is vital that the NLW is set at a level that the economy can afford, without job losses or harming job creation.”

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SME output grows at fastest rate for 7 years

Output among small and medium-sized manufacturers grew at the fastest pace in 7 years as demand for exports remained strong in Q2 2017.

Out of 364 businesses polled for the SME trends quarterly survey, 38% reported an increase in total new orders in the 3 months to 31 July 2017.

36% also said the volume of orders grew at a strong pace, with export orders growing at the highest rate since April 2011.

Furthermore, 28% of SMEs took on more staff in Q2 2017 and intend to continue recruiting in the next quarter. 

Overall, 19% of firms were optimistic about the general business situation compared to 3 months ago and 22% are more confident on their export prospects for the next 12 months.

Alpesh Paleja, principle economist at the Confederation of British Industry, said:

“Firms are clearly in an exporting sweet spot, able to exploit the competitiveness gains from a low exchange rate and a firm global backdrop.

“But the boost from a lower exchange rate will fade over time, so maintaining frictionless and tariff-free trade routes with the EU will be critical for future exporting success.”

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SMEs hit with auto-enrolment fines

A total of 16,218 fines have been issued to small businesses for not complying with auto-enrolment duties in the last year.

For employers with less than 30 employees, 9,089 penalties were issued with an additional 1,143 fines handed out to employers with 31 to 250 members of staff.

Larger businesses with more than 250 staff received just 61 fines, suggesting smaller firms are more likely to ignore their auto-enrolment duties.

A Freedom of Information Act (2000) request for data from the year to March 2017 revealed:

  • businesses with less than 30 employees received an average fine of £540 for missing their duties
  • employers with 31 to 250 staff were hit with an average penalty of £990.

Darren Ryder, director of auto-enrolment at the Pensions Regulator, said:

“There are more than 500,000 employers whose duties are still to begin over the coming months. 

“I would urge each of them to check they know what they need to do and when they need to do it so they can seek our help if they need it.”

The deadline to complete your auto-enrolment duties is 5 months before your staging date, therefore it is a legal requirement to meet your responsibilities on time to avoid any penalties.

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Firms ‘unprepared’ for post-Brexit labour market

Almost half of businesses (47%) have unrealistic expectations on the post-Brexit immigration system, according to a study.

The Resolution Foundation surveyed 503 companies who employ EU workers and found only 17% expect no change to the current immigration system, while 30% expect the current system to be retained for EU nationals offered jobs in the UK.

Furthermore, 46% do not see any changes in the number of EU workers recruited for their business over the next 12 months. Britain is due to exit the EU at the end of March 2019.

24% expect to increase the number of migrant workers they employ, whereas 26% may see a decrease in the number of staff they employ from the EU.

Torsten Bell, director of the Resolution Foundation, said:

“It’s not just government that needs to step up preparation for Brexit. Many British firms are totally unprepared for this change, particularly when it comes to migration.

“Now is the time for both firms and government to focus on how we navigate that journey and the changes to our labour market it brings.”

Talk to us about how Brexit may affect your business.