BUSINESS

Are you accidentally underpaying your staff? As the National Minimum and Living Wages are due to rise again in April 2023, we’ve answered some common questions around salaries in the early years

Most employers in the early years are keen to ensure that their team are paid fairly for all their dedicated work supporting children. Not only this, but employers that fail to pay staff the National Minimum Wage can be fined, subject to legal action and named on a public list if they are caught by HMRC.

To help you make sure that you’re working within the rules, we’ve covered some of the most common points of confusion in the early years sector.

Training time
All mandatory training must be paid at least the NMW rate. If staff are required to do training at home, they must be paid for this time. You will need to work with your staff to find out how long it took them to do the training and pay them for all this time.

Uniform deductions
If deductions are taken from an employee’s salary for having a uniform, this could take their pay below the legal minimum if they are on or close to the NMW. It doesn’t matter if the deduction is taken off their payslip or if the worker purchases the items independently – the cost will still reduce their pay.

This also applies to any dress code you set. If your setting provides staff with a top for free but tells their staff to wear black trousers and black shoes, this will also reduce their pay as the cost is in connection with their employment. It doesn’t matter if the worker can also wear these items outside of the setting, or if they purchase the items themselves from a high street retailer. The cost will reduce their pay, and could take them below the NMW, unless their employer reimburses them for the expense.

Deductions for early years fees
It’s quite common for early years staff to send their own children to the early years setting where they work. There is, however, a risk that wages could fall below the NMW if fees for this are deducted through their payslip. The legislation and guidance states that if an employer “has use and benefit” of the deduction, that deduction will reduce NMW pay.

It does not matter that the employer is recouping a loss or that the worker is benefitting from the deduction, with reduced early years fees, for example. This deduction will still reduce their pay and could put them below the NMW. However, this only applies to deductions – you can still charge workers for placing their child in your setting, but it must be done outside of the payslip. Paying for goods or services not connected with employment – such as via bank transfer or by debit card – is allowable under NMW legislation. But remember that this only applies when paying for goods or services separately, it doesn’t apply to deductions.

Employers that fail to pay staff the Minimum Wage can be fined, subject to legal action and even named on a public list if caught.

Age-related increases
Another common error is remembering when to start paying new NMW rates. For example: if Sophie turns 21 on 11 January 2023, the NMW wage for her age (18-20) was £6.83 per hour but once she is 21, she will be entitled to £9.18. Sophie will be entitled to the new higher rate at the start of her next pay reference period.

If Sophie is paid monthly, and her pay reference period is from the start to the end of the month, she will only need to be paid the higher rate from 1 February 2023. However, if Sophie is paid weekly, and her pay reference period starts on Monday and ends on Sunday, she will need to be paid the higher rate from 16 January 2023.

Apprenticeships
There is a separate NMW rate for apprentices, but specific criteria must be met in order to be eligible to pay this lower rate. Firstly, the worker must have either a statutory apprenticeship agreement or a contract of apprenticeship. Secondly, the worker must be under the age of 19 or in their first year of their apprenticeship.

For example: Tom is 17-years-old and has a contract of apprenticeship. He can be paid the apprenticeship rate (£4.81 per hour) until he is 19-years-old. When Tom turns 19, he must be paid £6.83 per hour from the start of his next pay reference period.

Another example: Jade is 36-years-old. She has a contract of apprenticeship. She can be paid the apprentice rate for one year only. After her first year, she must be paid at least £9.50 per hour from the start of her next pay reference period.

Additional duties
Another common risk in the early years sector occurs when employers offer staff a set rate for tasks outside of their usual work in the setting. The NMW is calculated by two factors: time and pay. Time spent on tasks such as updating records or completing paperwork is working time for NMW purposes and still requires the same minimum hourly rate. This should be reflected in how staff are paid for this time.

For example, in December Keeley worked a total of 165 hours – including five hours spent updating the records of her six key children. She is paid the NMW of £9.50 an hour for work in the setting and £5 per record updated. Her payslip shows £1,520 and £30, totalling £1,550. For NMW purposes, Keeley would be underpaid because the total hours she worked (165) should all be paid at £9.50 – this means that her total pay should have been £1,567.50.

Childminders and the minimum wage
Childminders, by definition, are self-employed. That means that they do not need to pay themselves the NMW. However, if they take on an assistant, they may have to pay the childminding assistant the NMW – it depends on whether the assistants are genuinely self-employed or not.

Are they self-employed?
You cannot just tell someone that they are self-employed – it depends on what happens in practise.

Here are some indicators that a childminding assistant may be self-employed:

• they provide their own equipment such as learning materials, resources etc
  
• they can supply a substitute assistant on their behalf if they are unavailable
  
• they can decide how and when to do the childminding activities
  
• they complete self-assessment tax returns every year
  
• they work for multiple childminders and/or settings
  
• they can take on more work to increase their profit or reduce their workload and risk financial loss
  

• can provide their time and effort completely freely can come and go as they please is under no obligation to provide services
  
• can provide their time and effort completely freely can come and go as they please is under no obligation to provide services
  
• cannot be made to perform specific duties
  
• does not suffer any sanctions if they do not perform their duties
  
• does not receive or expect any monetary payments or benefits in kind