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Why Pay the National Minimum Wage?
Newsletter issue - March 09.
If your business is under pressure to keep costs low, you may be tempted to pay the lowest possible wage you can get away with. But you must not take a chance with paying below the national minimum wage (NMW). The current legal NMW hourly rates depend on the worker's age as follows:
- 22 and over: £5.73
- 18 to 21: £4.77
- 16 and 17: £3.53
If you don't pay at least these rates, and Tax Office find out, you are likely to get hit with an immediate and automatic fine. The fine will vary between £100 and £5,000, depending on the amount of underpaid wages that exist when the problem is discovered. If the underpayment is very serious the Tax Inspector can recommend that your case should be heard in the Crown Court, which can impose an unlimited fine.
You will also have to pay the underpaid wages to your workers for all relevant pay periods falling in the last six tax years. These underpayments of wages must be made good at the current NMW rates, not at the rates that applied when the work was done.
However, do note that minimum wage legislation doesn't apply to people living in a family and working in the family business. This doesn't include Limited Companies but as far as working directors are concerned who don't have an explicit contract of employment, they are not subject to minimum wage legislation, so it can help to avoid giving them such a contract where you want to use dividends instead as a more tax efficient profit extraction strategy.
What our clients say about us...
"Paul has provided accountancy services to my company for 2 years now. I can recommend Paul very highly; his skills as an accountant are highly detailed and professional and he is always available to provide advice. One aspect of the way Paul works that I greatly appreciate is a preference to meet face to face when there is a detailed conversation to be had. I personally find this more productive and is a benefit of working with a small accountancy firm that you wouldn't get with the large faceless providers."
ALISTAIR FAIRWEATHER - PROGRAMME & PROJECT MANAGER, DELIVERING/RESCUING I.T. 7 BUSINESS CHANGE WITH BUDGETS UPTO £50M INC SUPPIER MANAGEMENT
"I couldn't ask for more from Paul as an Accountant. Paul has been accountant to Work Relief Charity Recruitment for just over a year now and is proving an invaluable asset. Accurate, knowledgeable, flexible with an emphasis on service delivery, I would recommend Paul's services to any organisation looking for an accounts professional."
Neil Price - Managing Director at Work Relief Charity Recruitment
"Paul was a referral from a family member when I started my business 2 years ago. As this was the first time I had ever run my own company I was totally clueless over the financial side of matters and was worried that I may have made mistakes in any of my accounting. I needn't have worried as after enaging Paul for a set monthly fee he was always there on the end of the phone for all sorts of questions I had and no matter how trivial they were Paul gave me all the information I required and more and did an excellent and painless job at the end of my first year! Couldn't ask for any better to be honest. Just two words - hire him!!!"
Lee Westrap MBCS - Director - Bulldog IT Services
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