Businesses failing to pay minimum wage
- 12th July 2023
Just over 200 businesses – including some of the country’s best-known retailers – have failed to pay the minimum wage and will have to repay workers and face penalties of up to £7 million.
The minimum wage rules can be complex, and the fact that some major retailers have been caught out shows just how difficult compliance can be.
One particular area where businesses were not compliant was in regard to uniforms. The rules differ depending on whether uniforms are required as a condition or employment or if they are optional.
- If employees are required to wear specific uniforms, any deduction by the employer to cover the cost reduces pay for minimum wage purposes. Similarly, if an employee has to reimburse their employer or has to purchase the uniform themself.
- If uniforms are optional, pay is only reduced where the employer makes a deduction from the employee’s pay.
The other major problem area was paying correctly for time worked. This is not anywhere as simple as might first appear as illustrated by these examples:
- Being on standby near the workplace counts as working time, but not if the worker is on standby at home nearby.
- Travelling between assignments counts, but from home to the first assignment, and then from the last assignment back home does not – unless the first and last trips are by train and the employee is working on their laptop.
A penalty of up to 200% of the unpaid wages can be charged, subject to a maximum penalty of £20,000 for each employee. However, the penalty will be cut in half if the unpaid wages and penalty are paid within 14 days.
Non-compliant employers will also be named and shamed, even where minimum wage underpayment is not intentional.
It is worth taking advice if an employer has any uncertainty over their wage position. A business can check if it is paying the correct amounts of National Living Wage and National Minimum Wage using HMRC’s calculator here.
If you wish to discuss this topic further, please do not hesitate to contact us.
All data and figures referred to in our news section are correct at the date of publishing and should not be relied upon as still current.