National Minimum Wage (NMW)
The national minimum wage is one part of current legislation where Service Providers such as the cps group ALL have to adhere to strict regulations and guidelines when operating their payment models.
It is a legal requirement that every employed worker in this country, according to their relevant age group and work status, is entitled to be paid a minimum amount of salary per hour. This cannot be lawfully amended, corrupted, hidden or ignored as part of any employment model to try and improve a person’s take home pay or for a business to gain any commercial advantage.
The current rates are:
- £6.19 – the main rate for workers aged 21 and over
- £4.98 – the 18-20 rate
- £3.68 – the 16-17 rate for workers above school leaving age but under 18
- £2.65 – the apprentice rate, for apprentices under 19 or 19 or over and in the first year of their apprenticeship
Genuinely Self-Employed workers do not have to adhere to these regulations as they are by definition paying themselves and can therefore choose the amount of remuneration that they want to take from their business earnings.
Due to the wilful abuse of these regulations historically by a number of Umbrella Company Service Providers HMRC and Government brought in new legislation in 2011 to address this. In its simplest form the new regulations made it clear to Umbrella Company providers that legitimately incurred expenses could only be used to reduce taxable pay in order to gain tax relief up to the amount of NMW.
Now there is a bit more to this for Umbrella Companies because the contract income that they receive for the worker also has to include Holiday Pay (HP – Working Time Regulations), Employers NI (ERNI – Taxation law) and whatever fee the Umbrella Company charges too (check out your umbrella to see how flexible our solution is). This means that the Umbrella Company can only reduce taxable pay to NMW + HP + ERNI + FEE.
Therefore the actual minimum amount for a worker doing 37.5 hours/5 days a week that an Umbrella Company charging a fee of £20 can reduce taxable pay to through applying expenses is £293.00 – which is equivalent to £7.81 per hour an increase of £1.62 per hour on NMW.
When engaging with Service Providers to choose an Umbrella Company Solution for your workers – be mindful of those that say that they can provide a Standard Umbrella solution to cater for workers on less than the figure quoted above – they cannot. If you have a large number of workers at or around NMW and need an outsourced solution then speak to our team at your payroll bureau who can help you achieve significant cost savings.
If you have any questions on any aspects of Legislation that may affect your business then do not hesitate to contact us on 0203 582 7950 and speak to our Compliance Manager.