The government has released the latest list of employers they are naming for failing to pay the National Minimum Wage (NMW). According to HMRC, the 518 employers named have since paid back what they owe to their staff and faced financial penalties of up to 200% of their underpayment.
Often, it’s mistakes or a misunderstanding of the law that leads to underpayments to employees rather than a deliberate intention to pay staff less than they are legally entitled to. That household names such as Pizza Express, Lidl and British Airways found themselves on the list shows how even well-resourced businesses can trip up.
So, what were the top three ways in which the employers on the naming and shaming list got it wrong?
- Deductions from pay
- Unpaid working time
- Failure to pay the correct rate to apprentices
Deductions from Pay
34% of employers found themselves being caught out by a deduction or reduction in pay that meant their employees were paid below the applicable NMW rate.
Not all businesses are aware that some deductions, such as those in respect of ‘expenditure in connection with employment’, will reduce the amount of an employee’s total earnings for NMW purposes, meaning that an employee may not receive the NMW pay they are entitled to. This can happen, for example, where there is a deduction from pay for the cost of a uniform or a requirement for them to purchase items.
Unpaid Working Time
31% of employers found themselves in hot water when unpaid working time took employees below the NMW. It’s important for businesses to make sure that they monitor working time and pay to avoid inadvertently falling foul of the law. Whilst this is important in respect of all employees, it is something to be particularly conscious of in relation to those who are paid at, or only slightly above, minimum wage rates.
For example, one of the mistakes some employers in the naming and shaming list made was in relation to additional work before/after a shift. This type of unpaid working time may involve only small amounts of time, but it has a cumulative effect, particularly if it occurs on a regular basis. It’s not difficult to imagine that this could lead to underpayment of minimum wage for those workers who are paid only slightly above minimum wage rates. Also be alert if an employee has to go through any ‘compulsory steps’ before starting or finishing work, e.g handovers, security searches.
Other areas highlighted as potential causes of underpayments in some cases included:
- Rounding clock-in time to the nearest hour, half hour or 5 minutes
- Unpaid travel time (travelling on business during normal working hours is treated as working time for the purposes of the NMW rules unless the travelling is between the worker’s home and their normal place of work or the worker’s home and an assignment)
- Underpayment due to cash flow issues
Have a question about unpaid working time or another issue? Please get in touch.
Failure to Pay the Correct Rate to Apprentices
22% of employers failed to pay the correct rate to apprentices. This was due to reasons including:
- Incorrectly classifying an individual as an apprentice and paying them the apprentice rate of pay
- After an apprentice has completed their apprenticeship, failing to increase their rate of pay to the applicable NMW rate for their age
- Where an apprentice is aged 19 and over and has completed the first year of their apprenticeship, still paying them at the apprentice rate.
It’s important to note that the apprentice NMW rate is for apprentices under 19 – it can be paid to those who are aged 19 and over only if they are in the first 12 months of their apprenticeship. For some employers, this will mean that they need to keep an eye on the age of their apprentices as they may become entitled to a higher rate of NMW pay during their apprenticeship.
Have an HR matter you would like assistance with? Please get in touch, as we are happy to help.