Don’t let your payroll embarrass you

By Sam Thomas | 23rd August 2018 | 9 min read

Many businesses aspire towards becoming a widely recognisable brand; but recognition can also lead to greater embarrassment should your practice fall short.

In a recent example, HMRC have named and shamed 239 UK employers for failing to pay the National Living and Minimum Wage. In addition to being publicly shamed in the press, these businesses have had to pay a record £1.44 million in back pay across 22,400 workers.

They’ve also landed record fines of £1.97 million for underpaying their workers and apprentices. The back pay was for more workers than in any previous list, with a variety of reasons including:

  • Deducting costs like uniforms from employee wages
  • Underpaying apprentices
  • Not paying for travel time
  • Misusing the accommodation offset
  • Calculating pay using the wrong time periods

What’s the law?

The National Living Wage is the legal minimum you can pay workers aged 25 and over, and came into effect on 1 April 2016. It is currently set at £7.83 per hour.

The National Minimum Wage applies to everyone over school leaving age and varies depending on age brackets. It is currently set at the following rates:

21 to 24


18 to 20


Under 18




Both the Living and Minimum Wage rates change every April.

Apprentices earn a rate of £3.70 per hour. This only applies if the apprentice is aged under 19 years old, or (if over 19) in their first year of apprenticeship. If neither of these criteria apply (if they’re aged over 19 and completed the first year of their apprenticeship, then they’ll be entitled to the National Minimum Wage.

You can learn more of 2018’s key payroll figures and dates in our free Payroll Fact Card – available to download here.

Paying for travel time

The commute between work and home, and other incidental travel, is generally not paid for by the company. Any travelling employees do for work-related activities, whether those are local or away from home, should be paid for.

Understanding the accommodation offset

Unlike other company benefits (including cars, childcare vouchers or food), accommodation provided by an employer can be taken into consideration when you calculate the National Minimum or Living Wage.

In the April 2018 tax year, the daily accommodation offset rate is £7 and the weekly rate is £49.

If you, as an employer, charge more than the offset rate then the difference is taken off the worker’s pay. Therefore the higher the accommodation charge, the lower your employee’s pay will be when calculating the minimum wage. Conversely, the offset rate is added to the employee’s pay if the accommodation is free. And when the accommodation charge is at or below the offset rate, it doesn’t have an effect on the worker’s pay.

This is a complex area, but there are examples of accommodation rate in minimum wage calculations on the HMRC website.

Avoiding mistakes

A common issue in many business is that it’s unclear where the payroll function sits. After all, payroll is a non-core business process but remains at the heart of any organisation with employees.

Some businesses choose for it to be an extension of their finance department, while others tie it to HR. As a successful payroll is closely linked to employee satisfaction, and there are plenty of overlaps in benefits in kind and other areas, an integrated HR and Payroll solution is normally the best one for businesses with over 100 employees.

Even for businesses that have taken this step, they can find that using antiquated or manual systems means that they make unnecessary mistakes – such as using the wrong time periods. This is why many successful business are looking for digital solution for their payroll. Software makes paying your employees on time and filing the right paperwork to the right place at the right time easy.

Outsourcing payroll

For the largest businesses, human error can prove costly. It can also be difficult to recruit and retain a team with the necessary expertise or qualifications for businesses of their size.

Outsourcing to experts is often considered by businesses, as it’s a cost-effective way to ensure you’re getting the accuracy and diligence required when faced with regular auditing and intense scrutiny.

When teaming outsourced payroll with employee self-service, businesses don’t have to spend time chasing individual queries and admin – freeing their time up to look at the bigger picture of either HR and finance.

To learn more about outsourcing payroll as a large business, download this free guide we’ve produced and take a look at how it could slot into your existing business model.