As well-known brands are named and shamed, when can deductions lawfully be made from National Minimum Wage (NMW)?
Since 2015, the UK Government has ordered employers to pay over £100 million of underpaid wages, with many big brands being named and shamed for non-payment of the national minimum wage ("NMW"). In total, 202 companies of all sizes failed to pay almost £5 million to around 63,000 workers. Between them the defaulters have also been fined around £7 million.
How has this happened? For the well-known brands, primarily it appears to be inadvertent admin or technical errors. For example, WHSmith has said their underpayment resulted from a "genuine error" related to a company uniform policy and Marks & Spencer cited an "unintentional technical issue" from several years ago. The errors were rectified as soon as they were identified. However, many named on the list are likely to suffer at least some reputational damage as a result of being named.
In addition to naming and shaming, HMRC may also issue a notice to businesses to pay money owed to workers, issue a fine of between £100 and £20,000 for each affected employee or worker (even if the underpayment is worth less) and/or instigate criminal legal proceedings. The individual workers may also make a claim to an employment tribunal, although they need to choose to either do that or complain to HMRC, they cannot do both.
What can be lawfully deducted from the national minimum wage?
The short answer to this question is that there is very little that can be deducted that would lawfully leave you with less the national minimum wage in your take-home pay. What can be deducted includes:-
- Tax and national insurance contributions
- Paying back an advance or overpayment
- Pension contributions
- Trade union fees
- A charge for accommodation - however note the current maximum allowable deduction is only £63.70 per week
How to avoid unnecessary mistakes
- Ensure all working hours are counted - that might be more than simply the time spent doing the job if the employee has to undertake any mandatory checks or get changed for work on site or similar before work starts or after it finishes
- Be careful when using travel schemes, salary sacrifice or similar as this could take the average hourly rate below NMW
- Be careful if the employee is required to pay for items such as uniforms of for training courses - any cost deducted from wages could potentially bring the average below the NMW. This can still be the case even if wearing a uniform is voluntary if it is acquired "in connection with their employment"
- Be careful even in relation to voluntary arrangements, for example an agreed monthly or weekly contribution towards a future Christmas Party or similar event could bring pay below the NMW
- Make sure you know what does count towards NMW and what does not. For example, commission does count, but tips do not.
- Keep appropriate records. It is for the employer to prove that the NMW has been paid, not for the employee to prove it hasn't.
For the current national minimum wage rates see April 2023 Employment Law Changes.
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