Businesses still falling foul of national minimum wage rules

,

Add a comment

With different rules about what counts towards the NMW the regulations are not always easy to put into practice

The national minimum wage (NMW) is a specified minimum hourly rate of pay to which most workers are entitled. All employers are obliged to pay the NMW, irrespective of their size. The detailed rules regarding the operation of the NMW regime are set out in the National Minimum Wage Regulations 2015.

A breach of the regulations can be costly, with not only arrears of wages to be repaid but also a fine of up to 200% of those arrears. It is not a straightforward area of law and even a non-intentional breach of the regulations can come at a high cost.

Wagamama, Marriott Hotels and Karen Millen are among 179 employers that have recently been named by the government for failing to pay the national minimum wage to their employees.

As well as recovering back pay for 9,200 workers, the government also fined the employers a total of £1.3 million for breaking national minimum wage laws. The most notable offending sectors were retailers and the hospitality industry.

Restaurant chain Wagamama, which topped the government’s list, failed to pay £133,212.42 to 2,630 staff. Its explanation rested on an "inadvertent misunderstanding” of the regulations in relation to staff uniforms.

Employers will no doubt be keen to avoid the stigma of their name being included on the offenders list. With the minimum wage rates rising again on 1 April these penalties serve as a reminder to employers to review their pay practices and ensure compliance.

However, with different rules about what counts towards the NMW and what doesn’t, and depending on the factual situation, the regulations are not always easy to put into practice. Employers routinely face difficulties by making incorrect deductions from pay for uniforms, tools, tips and the provision of benefits, including accommodation.

There are five different rates of NMW for different categories of worker, including the National Living Wage, which applies to workers aged 25 and over.

An employee’s rate of pay for the purposes of the NMW Regulations must be calculated by reference to the sums received during each 'pay reference period' (which will be monthly if an employee is paid monthly) and divided by the total number of hours worked over that same period.

Difficulty arises as to what payments or benefits count towards the NMW. The policy behind the NMW legislation is that workers should receive the NMW in the form of cash, rather than benefits in kind. Therefore the value of most benefits in kind will not count towards the NMW. Certain deductions from workers' salaries in connection with staff uniforms or tools will be unlawful if they reduce the overall level below the NMW.

The only non-cash benefit provided to a worker that should be taken into account is the value of any accommodation organised by the employer as evaluated under the rules. Tips, gratuities and service charges cannot be taken into account when deciding if an employee has received the NMW.

Some tips for ensuring compliance with the NMW include:

  • Checking the applicable NMW rates each year as they usually increase every April – new rates will come in on 1 April 2018.
  • Being aware of who you have working in your business – those people who fall under the definition of 'workers' are entitled to the NMW as well as employees. Depending on the type of work carried out for the company, interns can also qualify for the NMW.
  • Keeping an effective record of the age of each of your employees as different rates of NMW apply to different age categories. The new National Living Wage is triggered when a person reaches the age of 25.
  • Be aware that making certain deductions, such as for uniform and tools, can reduce an employee's pay below the applicable NMW rate and this will be unlawful.
Catherine Hawkes is a solicitor in the employment team in the London office of law firm Royds Withy King
Comments
Change the CAPTCHA codeSpeak the CAPTCHA code
 

All comments are moderated and may take a while to appear.