Approximately 208 employers have been named and shamed by the Government in December 2021 for failing to pay their employees the minimum wage.
Between them, the employers had underpaid approx. 12,000 workers by around £1.2 million. The workers had been underpaid in different ways, including having deductions that reduced pay (such as complying with the dress code), not paying all working time (e.g. trial shifts), or failing to apply the correct rates.
By not complying with national minimum wage laws, the employers had to pay the workers what was owed, and paid financial penalties to HMRC.
So how can issues with non-compliance be avoided?
What is the minimum wage?
The National Minimum Wage (NMW) is the minimum hourly rate of pay set by the Government each year. The rates apply from 6 April each year.
The current and new rates are as follows:
|
|
Current NMW Rates |
New Rates from 6 April 2022 |
|
23 and older (also called the National Living Wage) |
£8.91 |
£9.50 |
|
21 – 22 years old |
£8.36 |
£9.18 |
|
18 – 20 years old |
£6.56 |
£6.83 |
|
16 – 17 years old |
£4.62 |
£4.81 |
|
Apprentices |
£4.30 |
£4.81 |
There is a difference between the National Living Wage (23 and older) and the Real Living Wage – the former is set by the Government and is compulsory, with the latter set by the Real Living Wage Foundation and compliance with it is voluntary.
Who is entitled to National Minimum Wage?
The above NMW rates apply to both employees and workers over the compulsory school age, with few exceptions for very specific categories of workers.
How is it assessed?
Compliance with the NMW is assessed by looking at:
- The worker’s pay reference period (typically one month),
- Their total gross pay (including salary, bonuses, commission),
- Any payments or deductions that affect pay for NMW purposes (e.g. deductions for uniform or tools),
- Their working time.
To find the worker’s hourly rate for NMW purposes, the worker’s total pay (gross pay less any deductions) in the pay reference period is divided by the total number of hours worked in that period.
Once the hourly rate has been calculated, it is then compared with the relevant NMW rate for that worker.
Consequences for non-compliance
Enforcement of NMW rates can be done either via HMRC or the worker themselves. HMRC enforce legislation on behalf of BEIS, and can serve a notice of underpayment, which will set out the arrears that need to be repaid by the employer and can include a financial penalty for the employer to pay to HMRC. This penalty is 200% of the underpayment, up to a maximum of £20,000, but is reduced to 50% of the underpayment if paid within 14 days.
Employers can also be named on a public list, and civil proceedings can be issued if the above remains unpaid.
The worker can also enforce the NMW rates, by making a claim in the Employment Tribunal for an unlawful deduction from wages or for breach of contract.
If you need any advice on the national minimum wage, please contact a member of our Employment Team.