The latest list of employers failing to pay the national minimum wage has been released by the Department for Business, Energy and Industrial Strategy, with 179 employers named and shamed.
The figures show that a record 9,200 workers are owed £1.1 million collectively. Employers on the list include household names such as Wagamama, TGI Fridays and Marriott Hotels. Of course, this release was also picked up by the media.
Restaurant chains Wagamama and TGI Fridays and the hotel chain Marriott were each fined an undisclosed amount for failing to pay staff the national minimum wage. Marriott Hotels was found to have underpaid 279 of its staff over £250 each on average. You can access the full list here.
How can your business ensure it meets its obligations to pay at least the national minimum wage and avoid being one of those who are named and shamed?
Firstly, from 1st April 2018 the minimum wage rates will increase as follows:
- National living wage: for workers aged 25 years and above will increase from £7.50 to £7.83 per hour;
- Standard (adult) rate: for workers aged between 21 and 24 years will increase from £7.05 to £7.38 per hour;
- Youth development rate: for a worker who has attained the age of 18 but not 21 will increase from £5.60 to £5.90 per hour;
- Young workers' rate: for a worker who has ceased to be of compulsory school age but has not yet reached the age of 18 will increase from £4.05 to £4.20 per hour; and
- Apprentice rate: for individuals who are employed under a contract of apprenticeship will increase from £3.50 to £3.70 per hour.
Employees also have the right to an itemised payslip, such right to be extended to workers also following the government's recently published "Good Work" plan.
In essence, to comply with the minimum wage requirements the average rate of pay a worker receives must be equal to or above the applicable statutory rate. This is calculated by taking pay divided by the working time. However, in calculating the worker's rate of pay an employer must be aware of the specific rules in relation to what counts towards pay, deductions that must be made, what period of time the rate is calculated over and what counts towards working time.
Many of the employers who have been named and shamed failed to pay the correct wage due to deductions for employees' uniforms.
For example, Karen Millen had to repay £9,847 to 28 workers, or nearly £352 each, because a number of staff were paid less than the minimum wage because they were required to wear the fashion brand’s clothing, purchased at a discount, as HMRC's audit in 2016 revealed. Similarly, some hotels were found to have deducted charges for live-in accommodation or late-night taxis from wages, taking their employees' pay below the minimum wage.
Employers are allowed to make certain deductions without affecting the pay used to determine compliance with the minimum wage rates, such as deduction of income tax and national insurance. However, other types of deduction, such as uniform costs (now subject to a wider interpretation from HMRC), will reduce relevant pay and therefore may bring the average rate below the minimum requirement. Knowing what can and cannot be deducted under the legislation is therefore key to ensuring compliance.
Enforcement of the national minimum wage
Employers also have a duty to keep records of the hours worked by their workers and the remuneration they have been paid. A worker has the right to see these records, and can take a copy, to establish if they have received the national minimum wage. If the worker identifies that they have been underpaid they can:
- Contact HMRC confidentially to raise a complaint; and/or
- Raise a claim at the employment tribunal for unlawful deduction of wages. Alternatively, they can raise a breach of contract claim at either the employment tribunal or a sheriff/county court, depending on the circumstances.
Separately, a HMRC enforcement officer may also inspect an employer's national minimum wage records, or can require them to be produced on reasonable notice. It is a criminal offence to refuse.
If an underpayment is identified, the HMRC penalty can be up to 200% of the total underpayment of the national minimum wage. The minimum penalty is £100 and the maximum penalty is £20,000, which is applicable for each underpaid worker.
Consequences of failing to pay the national minimum wage
Along with the financial consequences, an employer may also face public exposure - as happened with those employers named and shamed on the recent list - which is clearly an undesirable prospect. In order to avoid being on the receiving end of this double penalty employers must ensure they are compliant in paying workers at least the minimum wage.
Get in touch
If you have any concerns that your business may not be compliant with the legislative requirements, please do contact one of the members of our employment team who will be able to assist you.