Spring statement - devil in the detail

Rather than introduce tax changes, the Chancellor's Spring Statement focused on updating economic facts. But there are some important details coming out of No 11 on living and minimum wages that small companies must not overlook.

Care with employer/employee loans

As of 1st April, the national living wage (NLW) and national minimum wage (NMW) levels are going up. While this is positive from an employee perspective and should pose no problem for companies that do appreciate the value which staff and colleagues bring into a sound business, there are a few points that well-meaning business-owners should be aware of.

One example might be where an employee is given a loan by their employer. As an employer you might rightly think that you can take this back off an employee in the next pay month. Wrong! If you try to deduct this sum directly from your staff member's pay-packet, their average hourly wage could fall below the new NLW/NMW rates. In which case HMRC may intervene! It is best to seek repayment outside of the payroll system.

Legally-binding

It is also important to remember that paying the NLW and NMW is compulsory; the Government's aim is for NLW to rise to £9/hour by 2020. The new rates from 1st April are: -

Employee aged 25 and over £7.83/hour

Aged from 21 to 24 inclusive £7.38/hour

Young workers from 18 to 20 inclusive £5.90/hour

Workers aged 16 to 17 and over the compulsory school age but under 18 £4.20/hour

Apprentices under 19 or over 19 in the first year of apprenticeship £3.70/hour

"Voluntary living wage"

This is calculated and set on the basic living cost in the UK by the Centre for Research in Social Policy at Loughborough University. In London, the rate is set by the Greater London Authority. The Living Wage Foundation says that the UK living wage is £8.75/hour outside London and £10.20/hour within the capital.

Penalties

Employers who fail to pay the NMW are now liable to an increased penalty of up to 200% the amount in arrears; this used to be 100%. Just to make sure there is no misunderstanding, this increase applies to any notice of underpayment that relates to a pay reference period beginning on, or after, 1st April 2016.

There is also a maximum penalty of up to £20,000 per worker to be faced, although this is reduced by 50% if the unpaid wages are made good within 14 days.

If employees have been underpaid the NMW, any arrears are calculated at the current NMW rate.

Naming and shaming

In December 2017, HMRC published the 13th official naming and shaming list of 260 employers who failed to meet NLW and NMW requirements. It found that £1.7 million was owed to 16,000 workers while fines totalled £1.3 million.

Culprits included retail, hairdressing and hospitality. Common reasons cited for non-compliance were failing to pay workers for travel times between jobs, deducting money for uniforms from wages and not paying overtime. List-members includes Sports Direct in Bolsover, Primark Stores in Reading and Argos in Milton Keynes where employees were not paid for briefings and security checks that took place outside working hours.

State of the economy

The Office for Budget Responsibility (OBR) revised its forecast for UK growth in March up to 1.5% - a rise of 0.1% on its previous forecast announced in the Autumn Budget 2017. However, the GDP increase is expected to fall back to 1.3% in 2019 and 2020 because the OBR left its November 2017 forecast unchanged.

Borrowing fell to £45.2 billion in 2017/2018 - £4.7 billion lower than what the OBR predicted in November 2017; any further borrowing is expected to be restricted to funding for capital investments. Debt is also expected to start to fall as a share of GDP in 2018/2019.

The rest of Mr Hammond's statement was focussed on policy consultations that will inform the full Autumn Budget 2018.