Written by Brabners LLP
This month, over 500 employers have been named by the government for failing to pay the National Minimum Wage (NMW).
Following an investigation by HMRC, it was revealed by the Department for Business and Trade (DBT) that a total of 524 business had failed to pay NMW. The total amount that had to be repaid to workers was almost £16million, together with financial penalties of up to 200% of the underpayment.
Unfortunately, the NMW regulations are complicated and in most cases, employers who fall foul of the rules do so unintentionally.
Two of the main reasons cited for underpayments were:
- Deductions from wages for items such as food, uniform, equipment, childcare costs and salary sacrifice schemes.
- Unpaid working time, such as additional duties performed before or after a shift, rounded up clock-in times, unpaid travel time and cases where salaried workers worked in excess of their basic hours.
As noted above, one of the reasons that might take a worker who is on the cusp of NMW below the threshold is the requirement to pay for uniform or other associated expenses out of their pay.
Lessons can be learnt from both Monsoon Accessorize Limited and Argos who, in 2018, were both fined after underpaying staff. In Monsoon’s case, it required staff to pay for Monsoon clothing to be worn as uniform and Argos required staff to attend briefings and security checks outside of working hours. Both of these cases demonstrate how employers can unintentionally fall foul of the rules around NMW.
Enforcement for non-compliance
Enforcement is carried out by HMRC and can be initiated by either a complaint from a worker or third party, or from a targeted campaign by HMRC of certain sectors. Generally, HMRC will deal with this non-compliance through civil enforcement which may include a notice of underpayment. These notices are non-negotiable and will set out the amount of arrears of NMW that the employer must pay, as well as the financial penalty to be paid within 28 days.
Financial penalties have become increasingly severe over recent years with HMRC being able to issue fines of up to £20,000, plus a minimum of £100 per affected worker (even in cases where the actual underpayment was less than £100).
If notices aren’t complied with, proceedings in a civil court or employment tribunal are likely to be issued. Any further delays or instances of persistent non-compliance can result in criminal prosecution being brought against the offending employer.
The DBT intend to continue with the naming and shaming regime. Should an employer appeal the notice of underpayment and the appeal be unsuccessful, HMRC will refer the case to the DBT to consider naming the employer. The employer then has 14 days from the date of HMRC’s case closure letter to make written submissions to the DBT against being named. If no written representations are received, or if the DBT doesn’t accept the employer’s representations, they will be named and shamed.
Some of the employers recently “named and shamed”
Some of the 500+ employers and agencies who found themselves on the DBT’s list include:
Staffline Recruitment Limited failed to pay £5,125,270.93 to 36,767 workers.
Estee Lauder Cosmetics Limited failed to pay £894,980.65 to 2,698 of its workers.
Greggs Plc failed to pay £219,129.07 to 4,793 workers.
Dobbies Garden Centres Limited failed to pay £48,219.50 to 1,044 of its workers.
B&Q PLC failed to pay £33,887.41 to 77 workers.
In summary
Whilst the government understands that not all minimum wage underpayments are intentional, it has been clear in its intention to take robust enforcement action against those employers who don’t pay their staff correctly.
Unfortunately for umbrella companies and agencies, the recruitment sector is perceived as a high-risk sector by HMRC due to the high volumes of workers being paid and the fact that many of them are low-paid, meaning that a discrepancy with the worker’s pay could cause them to unintentionally fall below NMW. Umbrella companies should refresh their memories on the rules surrounding NMW. For more information and details about how to ensure you are paying workers correctly, see the government’s educational bulletin of 20 February 2024.
This bulletin is for general guidance only and should not be used for any other purpose.
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