UK: Minimum wage will put paper burden on business.

UK: Minimum wage will put paper burden on business. - Much of British industry breathed a sigh of relief as the Government announced the new national minimum wage of £3.60 an hour, as recommended by the Low Pay Commission. Small and medium-sized business

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Last Updated: 31 Aug 2010

Much of British industry breathed a sigh of relief as the Government announced the new national minimum wage of £3.60 an hour, as recommended by the Low Pay Commission. Small and medium-sized businesses in particular welcomed the exemption for 16 and 17-year-olds and formal apprentices, as well as the lower £3 rate for 18 to 20-year-olds and new starters undergoing training.

But what of the burden that complying with the legislation will impose?

From next April, this could be a bigger load on the backs of businesses than the wage itself, particularly for smaller set-ups without much administrative backup. Details on how the Government plans to enforce the minimum wage were not available as Management Today went to press, but many believe it will simply introduce more paperwork. 'It just means more bureaucracy for the smaller businesses on top of all the other workplace legislation the Government is introducing,' says John Davies, senior technical officer at the Association of Chartered Certified Accountants (ACCA). 'The law will impose a requirement for new records on hours worked and wage rates, which can be examined by employees and government inspectors. Many may find the extra book-keeping a nuisance.'

Andrew Godfrey, head of growth and development services at accountants Grant Thornton, agrees: 'The smaller the company, the bigger the burden.

It could cost a business thousands of pounds to produce these new numbers for what may be a very small payroll.' Further, asks Godfrey, what about those who pay by piece rate rather than by the hour? 'Farmers, for example, pay mushroom pickers so much per pound,' he says. 'It means changing the way they run their business.'

It is also unclear who is going to police the new legislation. The Government has indicated that it will be handed over to one of its agencies. The Contributions Agency and the Inland Revenue have been mooted as suitable candidates since they already have contact with employers paying low wages.

But some argue that this sort of inspectorate is too heavy-handed. Self-policing by employees would be preferable, says David Hands, of the Federation of Small Businesses. 'Instead of enforcement, we propose that pay slips show the actual hourly rate used to calculate earnings. If employees have a complaint, they could go to the Low Pay Commission,' he says.

If enforcement is introduced - which seems certain since a criminal offence will be involved for non-compliance - the Federation favours an agency such as Customs and Excise to oversee it. Regular VAT checks could then be combined with an inspection of wage rates.

The Working Time Regulations will be introduced next month and all employers will have to keep records of hours worked by their employees, says Martin Couchman of the British Hospitality Association. Dealing with the minimum wage should not add too much extra work. He predicts that one minor headache will be matching pay slips and cash in industries where the hours worked can vary from week to week. If pay slips are to detail the hours worked, staff will find they are either paid late or will receive their pay slip after the money has gone into the bank. The latter could defeat the object, damaging the clear link that the Government wants to forge between pay and hours worked.

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