National Minimum Wage – Avoid the ‘Name and Shame’Posted in : HR Updates on 22 March 2020 Issues covered:
National Minimum Wage – Avoid the ‘Name and Shame’
The Government recently announced the “biggest cash increase ever” in minimum wages. In April 2020 the National Living Wage is set to rise by a whopping 6.2% and younger workers who receive National Minimum Wage (NMW) will see their pay boosted with increases of between 4.6% and 6.5%, dependant on their age. It is widely acknowledged that these increases are necessary to reduce poverty and power imbalances between employers and workers at the lower end of the labour market. That being said, the significant risks that the overhaul poses for businesses in 2020 cannot be overlooked.
While paying employees the National Minimum Wage may seem like a straightforward obligation, complexity and ambiguity in the law often leads to accidental non-compliance by employers. A government scheme “naming and shaming” employers caught paying under the minimum wage was suspended in December 2018 amid concern from some firms who were being shamed on technical rather than deliberate breaches. No firms have been named in the last 18 months. However, come April 2020 the Government will be reinstating this “naming and shaming” campaign for businesses flouting National Minimum Wage and any failures to pay National Minimum Wage will result not only in the pay back of arrears to employees but also a 200% penalty. It is therefore critical that employers fully understand their National Minimum Wage obligations.
There are a number of notable ambiguities in the National Minimum Wage law that commonly catch employers out. Some examples of these grey areas include:
- Failing to compensate employees for uniforms. If you require your employees to wear a uniform, you cannot ask them to pay for it (or contribute to the cost) if this will bring their wage payments below the minimum rates. A number of popular stores and restaurants slipped up on this area; Wagamama, TGI Fridays and Karen Millen were all “named and shamed” in 2018 for underpayments relating to uniform.
- Salary sacrifice schemes. The Epilepsy Society, for example, deducted rent directly from employees’ pay when they were living in on-site, reduced rate accommodation. HMRC found that this practice meant that employee’s pay effectively dropped below the National Minimum Wage, despite it being a staff benefit.
- Including pay premiums in the calculation of minimum wage. For example, time-and-a-half or double-time for bank holiday or weekend working.
- Not counting the entire time the employee spends working For example, time spent locking up the premises.
- Not paying individuals for “trial shifts,” (commonly used in hospitality). Requiring applicants to work an unpaid trial shift is not illegal as long as the unpaid shift is part of a “genuine recruitment process” and does not last more than a few hours. The HMRC will assess trial shifts on a case by case basis.
- Not classifying workers correctly For example, registering staff as self-employed instead of employed.
- Failing to pay staff for travelling as part of their job For example, travel between homes in the case of care providers.
- Not paying employees for on-boarding, briefing and training exercises.
- If tips and gratuities are paid at work they cannot count towards the National Minimum Wage and should be paid on top of it.
Some top tips to avoid underpaying staff:
- Review employment practices and policies and consider whether they might create any issues with minimum wage compliance.
- Mitigate any potential risks such as any of the National Minimum Wage grey areas listed above.
- Find out which staff are eligible for the new rate and update the company payroll prior to April 2020.
National Minimum Wage Workshop: Compliance Ahead of New Increases
Think People Consulting are holding a workshop on National Minimum Wage in Belfast on Tuesday 28th April 2020. This workshop will assist employers in ensuring that their payment processes correctly reflect the latest regulations and case law.
The workshop will be co-delivered by Carson McDowell Solicitors Belfast and Think People Consulting, and will cover the legal requirements relating to National Minimum Wage as introduced in April 2020, the practicalities of implementation of the new rates, and ensuring that grey areas are avoided.
To view more information and reserve your space, visit: https://www.thinkpeople.co.uk/events-registration/?ee=45This article is correct at 22/03/2020
The information in this article is provided as part of Legal-Island's Employment Law Hub. We regret we are not able to respond to requests for specific legal or HR queries and recommend that professional advice is obtained before relying on information supplied anywhere within this article.