On 31 December 2020 Her Majesty’s Revenue and Customs (‘HMRC’) published its list of employers who failed to pay national minimum wage. The 139 named companies failed to pay £6.7 million to over 95,000 workers. To view the complete list click here.
The list includes large PLCs such as Tesco, Pizza Hut and Superdrug and many small businesses such as beauty salons, care homes and restaurants – a stark reminder to all employers that National Minimum Wage (‘NMW’) legislation must be complied with.
Not paying workers what they are legally entitled to could not only result in workers (or even HMRC) bringing costly claims but employers could also suffer adverse PR consequences and professional embarrassment from being publically exposed.
The legislation is complex; unfortunately it’s not as simple as looking at whether an employee’s salary/hourly rate of pay on its own is NMW compliant.
Compliance with NMW is assessed by reference to a worker’s hourly rate, which is calculated by dividing the total remuneration in the relevant pay reference period by the total number of hours worked or deemed to have been worked over that period.
The detail of the calculation itself depends partly on the type of worker and identifying the hours that will count for each relevant type of work. Therefore, it is important to correctly identify what type of work is being performed for NMW purposes as an incorrect classification may result in a worker being paid less than the NMW (and the employer being in breach as a result). It is also important to be aware that some elements of pay, such as tips, gratuities and service charges, do not count for minimum wage purposes.
This is a particularly important wake-up call given the unique, and often flexible, working arrangements employers may be adopting in light of the current pandemic. Certain working practices can lead to inadvertent breaches of NMW legislation e.g. requiring employees to undergo searches at the end of their working day or asking employees to attend briefings before the start of their shift etc.