How will the changes affect your workforce?
We expect that a large number of workers that are currently defined as ‘Unmeasured Workers’ will change to become ‘Salaried Workers’ as a result of this change in legislation. For example, workers receiving an annual salary and a salary premium (e.g. shift allowance) may now fall to be ‘Salaried Workers’ instead of ‘Unmeasured Workers’.
This will require a very different NMW calculation to ensure compliance.
Unless a ‘standard’ calculation year is elected for (and communicated and agreed with workers) then working time may need to be assessed across an annual period unique to each and every worker (usually based on their employment start date). This would involve the employer having to run up to 366 different definitions of ‘a year’ for their workers. It is very important therefore that Employers take action now to identify who is impacted, what the implications are and how to plan to address the practical challenges this change presents before the 2 year transition period ends.
When do these changes come into effect?
These changes will be effective from April 2020 following which there will be a transition period which will be in place until April 2022. During the transition period any workers meeting the new definition of a ‘Salaried Worker’ will need to be communicated to, explaining when the change will take place (eg: the start date of their new calculation year and the implications).
The date the worker will change to a ‘Salaried Worker’ and the NMW calculation year starts must be before 6 April 2022. Otherwise the worker will become a ‘Salaried Worker’ at this date and their calculation year based on their original employment start date which, as above, will mean that an employer will have to measure their workers’ working hours across up to 366 different definitions of a year rather than a single one.
Neither an employer nor a worker can choose their NMW worker category. It is defined under the legislation, therefore, there will not be an option to remain an ‘Unmeasured Worker’ from 6 April 2022 if all of the conditions are met.
What is the Calculation Year and why does it matter?
The calculation year is the period over which a ‘Salaried Workers’ working time is assessed. Whilst a pay period check is still required ‘Salaried Workers’ must be paid for their working hours over the course of a year.
Whilst spreading actual working hours over an annual period can be beneficial in certain circumstances it requires the tracking of working time throughout the year. Currently, for the majority of workers the calculation year will begin on the date on which the individual began employment, this creates potentially 366 different calculation years for the employer to track and manage.
The new legislation enables employers to define a standard calculation year, although care is needed as once set that definition cannot be changed for 6 years.