The National Minimum Wage and the National Living Wage rose by 9.7% this April.
The burden of wage costs is high, particularly in labour-intensive sectors such as retail. However, the risks of failing to pay national minimum wage are significant.
As well as a requirement to reimburse any underpayment there is the possibility of fines of up to £20,000 (and a minimum of £100 for each employee or worker affected, even if the underpayment is worth less) alongside the reputational impact of the government’s policy of ‘naming and shaming’ offenders.
Indeed, the government has recently announced details of a string of companies who have failed to pay the minimum wage. These included retail giants WH Smith, Marks & Spencer and Argos. All three retailers said the breaches were unintentional and had been swiftly remedied. The issue is a costly one: remedy will involve significant reimbursement together with fines, with the government confirming that penalties amounted to up to 200% of the arrears owed.
National minimum wage is not always easy to calculate as there are several areas of permitted deductions and also complex rules relating to workplace equipment. WH Smith, the worst offender, having failed to pay more than £1m to over 17,600 workers, explained that it had misinterpreted rules around uniforms, having asked staff to wear specific-coloured clothes without reimbursing them for it.
Employers should review pay to make sure that employees are not inadvertently receiving less than their minimum entitlement. Two areas to focus on are:
The burden of wage costs is high, particularly in labour-intensive sectors such as retail. However, the risks of failing to pay national minimum wage are significant.
As well as a requirement to reimburse any underpayment there is the possibility of fines of up to £20,000 (and a minimum of £100 for each employee or worker affected, even if the underpayment is worth less) alongside the reputational impact of the government’s policy of ‘naming and shaming’ offenders.
Indeed, the government has recently announced details of a string of companies who have failed to pay the minimum wage. These included retail giants WH Smith, Marks & Spencer and Argos. All three retailers said the breaches were unintentional and had been swiftly remedied. The issue is a costly one: remedy will involve significant reimbursement together with fines, with the government confirming that penalties amounted to up to 200% of the arrears owed.
National minimum wage is not always easy to calculate as there are several areas of permitted deductions and also complex rules relating to workplace equipment. WH Smith, the worst offender, having failed to pay more than £1m to over 17,600 workers, explained that it had misinterpreted rules around uniforms, having asked staff to wear specific-coloured clothes without reimbursing them for it.
Employers should review pay to make sure that employees are not inadvertently receiving less than their minimum entitlement. Two areas to focus on are:
- Deductions or payments from wages that take pay below the relevant minimum rate; and
- Unpaid working time (e.g. getting changed into PPE pre and post shift, clocking in and out time being rounded, employees not being paid for mandatory training, time worked on a sleep in shift, or carrying out trial shifts).
