Are you paying the National Minimum Wage?

In recent years the government has been keen to ‘name and shame’ those employers who have failed to pay the national minimum wage (NMW) to all of their workers. Employers who fail to meet their NMW obligations may be subject to a penalty of £20,000 per underpaid worker, plus an order to pay any arrears of wages directly to the affected employee.
In its current ‘name and shame’ publication, retail store Monsoon Accessorize tops the list for failing to pay £104,507.83 to 1,438 workers. It may seem surprising that such an established, high profile company could fall foul of its NMW obligations in such a manner however, there are a number of means by which an employer can inadvertently do so. As an employer, some of the most prominent pitfalls to be aware of are:
Benefits in Kind and Deductions
Accommodation is the only benefit in kind which can count towards a worker’s pay for NMW purposes. Any other deductions which an employer makes from a worker’s pay to cover the cost of items which are necessary for the worker’s job, including uniform and tools, will have the effect of reducing the rate of pay.
This is how Monsoon Accessorize fell foul of its obligations; the company required employees to purchase clothing from its stores to wear as uniform.
Not paying commission on time
Employers who use commission payments to top up workers’ pay to the NMW threshold must ensure that this is done every pay period which must not exceed 31 days.
Salary Sacrifice Schemes
Certain salary sacrifice schemes, especially with lower paid workers can result in employees’ basic pay being reduced to beneath the NMW threshold.
Incorrect categorisation as individuals as unpaid interns or volunteers or, self employed contractors
An individual will only be classed as a genuine intern or volunteer in certain circumstances. If a person is required to undertake work, at a particular kind upon the instruction of the employer then this could give rise to an employment relationship which would warrant payment of the NMW.
Self employed contractors are not entitled to NMW however again, the distinction between a self employed worker and an employee can be fine and it is important to ascertain the correct employee status.
Overtime
Where low paid employees are expected to work overtime without additional payment, this can cause accidental underpayment in some circumstances. Close attention should be paid to workers’ hours and their remuneration packages.
In the event that you would like to discuss this matter in further detail or, if you would like for us to review your current practices in this regard please contact us on 01274 864999.