New UK wage rules may raise compliance risks for employers: BDO

Businesses across the UK could face a significant rise in compliance risks from April, as new National Minimum Wage (NMW) and National Living Wage (NLW) rates come into effect, according to professional services firm BDO.

BDO’s latest survey reveals that 98 per cent of mid-market companies expect a higher proportion of their staff to earn within £2 (~$2.58) per hour of the NMW, raising the likelihood of payroll errors and potential breaches.

“Those employers who have historically paid wages above the minimum levels may now find themselves in a position where they have to pay close attention to the rules to ensure they are NMW compliant,” Caroline Harwood, head of Employment Tax at BDO said.

From 1 April 2025, the National Living Wage—applicable to workers aged 21 and over—will rise by 6.7 per cent to £12.21 (~$15.72) per hour. Younger employees will also see notable increases, with the rate for 18- to 20-year-olds climbing 16.3 per cent to £10 (~$12.90) per hour, while those under 18 will be entitled to £7.55 (~$9.74), up 18 per cent.

These above-inflation increases mean a growing proportion of the workforce will be paid at or near the legal minimums, amplifying the risk of accidental non-compliance, the BDO noted.

Falling foul of the NMW rules can trigger consequences, including HMRC-imposed penalties of up to 200 per cent of arrears and public naming and shaming of offending companies.

“There are a number of risk areas for employers to consider – notably around salary sacrifice, deductions for uniforms or accommodation, or memberships of savings clubs that could in certain circumstances tip them over the threshold into non-compliance. All too often, we see household names appearing on the list of companies judged to have breached the National Minimum Wage rules, many of whom are likely to have been tripped up on technicalities,” Harwood stated.

Note: The headline, insights, and image of this press release may have been refined by the Fibre2Fashion staff; the rest of the content remains unchanged.

ALCHEMPro News Desk (HU)