National Minimum Wage : Common Errors
Background
The latest list of employers that have failed to comply with national minimum wage legislation has recently been published by the Department for Business, Energy and Industrial Strategy (“BEIS”), comprising of 233 employers and affecting around 13,000 employees, with retailer Argos topping the “name and shame” list.
Argos is believed to have failed to calculate some workers’ hours correctly, as employees were not paid for attending briefings at the start or end of shifts, as well as security searches at the end of their shifts. As it is easy to fall foul of the rules we thought it would be useful to take at look at some of the common errors employers make with regard to the national minimum wage.
Detail
Employers should now be applying the new national minimum wage and national living wage rates which came into force on 1 April 2017. Even those employers who are aware of the new rates can inadvertently break the rules, so it is worth considering some of the common errors that have previously been highlighted by HM Revenue & Customs (“HMRC”) as follows:
- Paying an incorrect rate by failing to implement annual increases, missing birthdays and therefore not moving workers from one age band to another or making errors in applying the apprentice rates.
- Making deductions or payments from wages which reduce an employee’s wage below the national minimum wage or national living wage rates. Examples include deductions for uniforms and tools, and particular care needs to be taken where salary sacrifice arrangements are in place.
- Not accounting for unpaid working time, which is essentially hours worked and not paid, and examples include time helping to shut up shop or travelling time between assignments.
- Failing to classify workers correctly, for example mistakenly treating them as either volunteers or self-employed.
- Including top ups to pay that do not qualify towards the national minimum wage or national living wage rate.
The penalties for not paying the correct minimum wage are severe – up to 200% of the arrears owed to employees – so it is essential that employers remain compliant. In addition, to any arrears and the penalty, an employer may also be named in the media.
The minimum wage legislation does not however apply to the self-employed or office holders. An office holder is someone paid for the duties they perform and the most common example is a company director. This distinction between employee and office holder is important however, and can be a complex area, so further professional advice should be sort on whether the minimum wage legislation is applicable in such circumstances.
If you would like any further information or advice in connection with the above, please contact our Tax Director, Jenny Marks.
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