Some well-known household names such as WH Smith, Lloyds Pharmacy, and Marks and Spencers have been named and shamed for failing to pay the National Minimum Wage (NMW).
WH Smith, Lloyds Pharmacy, and Marks and Spencers failed to pay the national minimum wage.
It’s often inadvertent breaches that catch businesses out, such as a misunderstanding of how the law works or a technical issue, rather than there being a deliberate intention to underpay staff.
Even major high-street brands have appeared on the list showing just how easy it can be for businesses to make a misstep.
Forewarned is forearmed so here are three things all businesses should be doing to reduce the risk of falling foul of the law.
1. Be alert to common mistakes
According to the naming and shaming list, the employers on it had underpaid workers by:
- Deducting pay from their wages (39%)
Key take-away: If you are planning to deduct pay from your worker’s wages you need to make sure that what you are doing is lawful.
An area in which many businesses have found themselves being caught out in recent years is making deductions in respect of ‘expenditure in connection with employment’ such as the purchase of uniforms.
Not all businesses are aware that this will reduce the amount of the worker’s total earnings for NMW purposes, meaning that a worker may not receive the NMW pay they are entitled to.
When it comes to making deductions from pay, it’s important not only to be alert to the NMW rules but to bear in mind that employees also have a right not to suffer an “unlawful deduction from their wages”.
In general, this usually means that a deduction will need to be authorised by statute (e.g. a deduction for income tax), it’s authorised by your employee’s contract of employment or your employee has signified their written consent to the deduction before the event giving rise to the deduction occurs.
Thinking about making a deduction from your employee’s pay? Get in touch for advice on your situation.
- Failing to pay workers correctly for their working time (39%)
Key takeaway: Keep an eye on what you do – and don’t – pay your workers for to make sure you are getting it right.
Failing to pay travel time required by the NMW regulations is one of the areas where businesses can sometimes make a misstep. 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. Also be alert if an employee has to go through any ‘compulsory steps’ before starting or finishing work e.g. handovers, or security searches.
- Paying the incorrect apprenticeship rate (21%)
Key take-away: Keep track of the age of your apprentices as they may become entitled to a higher rate of NMW pay during their apprenticeship.
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.
Want to know more about employing an apprentice and the special contract that’s required? Get in touch.
2. Know the NMW rates
This basic step can help your business to stay compliant as it reduces the liklihood of avoidable mistakes occurring such as paying a worker the incorrect age related rate and not increasing NMW pay in time when the rates are raised. As you will probably already know, the NMW rates change every April.
The current NMW rates per hour are:
- Workers aged 23 and over: £10.42
- Rate for workers aged 21–22: £10.18
- Development rate for workers aged 18–20: £7.49
- Rate for 16 and 17-year-olds: £5.28
- Rate for apprentices under 19 and those aged 19 and over in the first 12 months of their apprenticeship: £5.28
3. Check and correct
If you have employees who are paid at or just above the national minimum wage, you may find it beneficial to check the pay of your employees and your business’s practice if it has been a while since you last did so.
This can help you to spot if there is an issue or any areas of concern and, if needed take appropriate corrective action.