Minimum Wage Changes - Don't be Named and Shamed

Whether deliberately or accidentally, if an employer fails to increase pay to comply with the new national minimum and living wages in force from April, they risk a significant penalty and being “named and shamed”.

Recent high profile employers facing damage to their reputations for “inadvertently” underpaying include Wagamama and Birmingham City Football Club. Although there will be some employers who just fail to increase pay rates to comply with the new higher rate of £7.83 in force from April for workers aged 25 and over, other employers will be caught out by less obvious breaches.

What do you need to pay staff for?

The first hurdle is to correctly identify what time is spent working. This could include security checks, travel between assignments, time spent receiving training, getting changed into a uniform on site, or even time spent waiting to clock-in. Recent legal challenges have also involved the correct way to pay staff who “sleep-in” as part of their duties. Many employers do not realise that this additional time is also covered and calculate pay rates based on core duties only.

What elements of pay count towards NLW?

Employers may also not realise that only certain elements of pay can be used to calculate NLW. Basic pay and performance related bonuses do count but allowances not linked to performance such as on-call allowances and shift premiums do not.  Other payments such as tips and gratuities, subsistence or other expense payments, or benefits including pension contributions cannot be taken into account.

What can be deducted from pay?

Employers can also fall foul of restrictions which prevent some deductions for agreed sums being made direct from pay even where requesting a cash payment would be fine. So, whilst an employer is entitled to make deductions direct from salary to recover accidental overpayments or for agreed pension contributions, expenses incurred for tools or uniform, or for costs incurred by an employer in providing a service to an employee, must not reduce pay to below minimum wage levels. This includes the offer of discounted purchase schemes such as staff shops or clothing discounts. When in doubt it is safer to arrange another method of payment rather than making a deduction direct from salary and risk breaching the minimum wage requirements.
On 9 March 2018 180 employers were named and shamed for underpaying more than 9,000 minimum wage workers by £1.1 million, which serves as a sharp reminder to employers to get their house in order – no-one wants to be named and shamed on the next list.

Kathy Halliday is an employment partner at VWV, a national law firm with a growing office and presence in Birmingham.  Kathy can be contacted on 0121 227 3711 or at khalliday@vwv.co.uk.

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