By: Adam Bernstein is an expert in tax issues and the law
The National Minimum Wage (NMW) has been a part of UK law for decades. It came into force in April 1999, and back then it required employers pay those aged 22 and over £3.60 an hour and £3 an hour for those aged 18-22.
With the passage of time new rates and age bands have been introduced along with the National Living Wage (NLW), in 2016, for those aged over 23. Now we’re in 2022, the matter of pay is high on the agenda. In particular, HMRC found that Taylors Service Garages (Boston) Limited of Boston had failed to pay £1,110.74 to three workers; C.P. Garage Services Limited, of Dundee, had failed to pay £592.62 to one worker; Greenaway Auto Electrical in Belfast failed to pay £606.94 to two workers; Clive Jones Motors Ltd (now with new ownership), based in Cardiff failed to pay £3,816.75 to one worker; and Decidebloom Limited, trading as Stoneacre Motor Group, in Doncaster, failed to pay £7,882.37 to 73 workers. These breaches were published by the tax body last December, albeit with no details on whether the breaches were accidental or deliberate.
FOLLOW THE LAW
Presently, the rate stands at £4.30 an hour for an apprentice, £4.62 for those under 18, £6.56 an hour for those aged 18 to 20, £8.36 for those aged 21 and 22, and £8.91 for those aged 23 and over and on the NLW. From April, the rates will rise to £4.81 an hour for an apprentice, £4.81 for those under 18, £6.83 an hour for receiving NMW or NLW; have been dismissed or experienced unfair treatment because of their right to the NMW or NLW; or have been discriminated against because their age means they are entitled to a higher minimum wage rate.
AVOID HAVING TO MAKE AN EXCUSE
Periodically, HMRC publishes reports on those employers that have been caught out for not paying the NMW or NLW. These employers are publicly named and shamed and that’s how the five firms named above came to prominence. Similarly, HMRC publishes the excuses that employers give those aged 18 to 20, £9.18 for those aged 21 and 22, and £9.50 for those aged 23 and over and on the NLW. The regime is self-policed by employers but with oversight from HMRC which if it finds an underpayment – either through its own investigations or a tip-off from a disgruntled employee – can take an employer to court. It should be noted that HMRC’s compliance officers have the power to take information away from an employer’s premises (or the premises where the information is held) to copy it. The maximum fine for non-payment is £20,000 per worker. Employers who fail to pay can also be banned from being a company director for up to 15 years. Beyond that, employers can be taken to a tribunal or civil court if an employee or worker feels they have not been when confronted about their non-payment. And non-payment is quite widespread. In the 2020 to 2021 tax year, HMRC’s investigators helped more than 155,000 workers recover more than £16m in pay. HMRC also issued more than £14m in penalties.
MAINTAIN EMPLOYEE RIGHTS
It’s worth noting that employees cannot be asked or told to sign away their rights. Furthermore, HMRC says that it reviews every complaint it receives about the minimum wage. It also encourages employees who think that they “are being short-changed or are a business that is unsure of therules or needs help to get things right, to get in touch”. HMRC has also gone on record to state that “any employer deliberately or unapologetically underpaying their staff will face hefty fines and other enforcement action.”
WHERE EMPLOYERS USUALLY GO WRONG
According to a recent report, there are two key areas where employers make mistakes that result in employees receiving less than their statutory minimum entitlement. These are deductions or payments from wages that take pay below the relevant minimum rate, and unpaid working time. Some of the example deductions that the report details that have led to NMW breaches are, to an extent, logical and may make sense at the time. These deductions include fees for processing attachments of earnings, and deductions for uniforms or for working equipment. On the flipside, some deductions are so simple to spot, especially those where the employee obtains a personal benefit from the deduction. Here, examples include deductions for parking permits, the cost of on-site meals, an employer-led Christmas savings scheme and those deductions for benefits provided through salary sacrifice. As for unpaid working time that the report identified, these involve underpayments where employees are required to change or wait for work purposes (security checks and getting changed into PPE before and after shifts for example), clocking in and out time being rounded down, employees not being paid for mandatory training, time worked on a sleep-in shift, or carrying out trial shifts. Another worrying area for the report is underpayment risks relating to apprentices such as failing to pay for time spent in training and failing to pay the correct age-related rate.
SO WHAT SHOULD EMPLOYERS DO?
First off, employers must consider what should and shouldn’t be included in the NMW and NLW calculation. There’s plenty of detail on the Gov.uk and Acas websites, but thought should definitely be given to hours worked, commission paid, tools and meals and compulsory time spent at work before and after the working day. The recent publication of named employers, and the most common reasons the report identified for those underpayments, is a reminder that even those who intend to pay their workers in full can still breach the NMW rules, even if the breach was not intended. Employers should review their systems and processes to ensure that they comply with the law and that this compliance is monitored. Employers should extend beyond payroll and time and attendance systems and include the firm’s working practices which might (accidentally) lead to increased working time or cuts in pay. If any underpayments are identified, they should be corrected, and steps taken to prevent it happening again. In time, employers will face a new Single Enforcement Body for workers’ rights, which will enforce holiday pay and Statutory Sick Pay as well as NMW. BEIS has not said when such as body will finally be established, but its clear that employers should expect even greater scrutiny of NMW and other pay issues.
Employees have rights and know how to exercise them. Furthermore, the law is clear here – NMW and NLW must be appropriately paid, and if they’re not, employers can expect regulatory trouble and public shaming.