National Minimum Wage
Common pitfalls

National Minimum Wage

On 9th March 2018 it was reported that, among many other chain giants, restaurant Wagamamas had been fined for failing to meet the national minimum wage requirements for its staff. The issue of failing to meet the national minimum wage was not limited to this industry, and highlights to employers of all sizes key areas to consider when ensuring the minimum wage is met.

When can there be an issue with meeting national minimum wage?

Common errors with minimum wage requirements can arise when the employee, even with their agreement, has money deducted from their wage for provisions which are a requirement of their role and for which they have no choice over, such as a required uniform, and this deduction then brings the average hourly rate below the national minimum. Non payment for overtime hours or for time travelling between jobs, when such time is classed as working time, can also run risk of falling below national minimum wage.

In the case of Wagamamas, employees were required to wear ‘casual’ black jeans or skirts with their company branded top. While the branded top was included in the uniform supplement, the skirt/jeans were not, as these were not considered by the company to be uniform. The resulting cost of purchasing such ‘uniform’, which employees were required to wear in accordance with their job role, meant that employee’s hourly rate fell below the national minimum wage.

In contrast this, deductions in relation criminal record checks which are required by law (as opposed to employer preference) due to the nature of the job will not be considered a deduction in pay when calculating national minimum wage compliance. In England and Wales, Scotland and Northern Ireland there are different schemes of record checks, but the rules regarding deductions and minimum wage compliance in respect of such are broadly similar.

If the check is a requirement of the role because of the nature of the work, then the cost of such check becomes the liability of the individual, whether that is a deduction for the check in relation to Disclosure and Barring Service Bureau (DBS), a deduction to meet the cost of registration for the Protection of Vulnerable Groups (PVG) scheme, or a deduction for an application to the Access Northern Ireland scheme. Therefore, making a deduction from an employee in respect of this cost will not affect national minimum wage compliance.

However, any associated costs of the check/scheme, such as administrative fees in the case of DBS checks, requesting scheme records in the case of the PVG scheme and registration fees in the case of Access Northern Ireland, will need to be taken into account when calculating national minimum wage compliance if these have been deducted from an individual’s wage or the individual has been required to pay the Employer in respect of this.

Where any check is not a requirement of the role, but the employer chooses to ask that a check is made against an employee, then deductions in accordance with the cost of the check/scheme in this instance will be taken into account for the purposes of national minimum wage compliance.

How to manage deductions from wage and ensure national minimum wage compliance

In accordance with the Employment Rights Act 1996, an employer is not permitted to make any deductions from an employee’s wage, unless as required by statutory provision (such as for tax or national insurance purposes) or with the prior written agreement of the employee (such as a signed contract of employment). Provided there is a contractual right to deduct, it is then important to keep in mind that any deduction should be reasonable and be an amount to cover actual losses suffered by the employer.

Common errors made when deducting from an employee’s wage include making deductions for things which the employee is required to have as part of their role, and therefore has no choice or control over the matter.

Uniform is a common example, as highlighted by the issue with Wagamamas. Where uniform is compulsory and the cost of such is deducted from an employee’s wage, bringing the hourly rate below the national minimum, there is risk and a strong line of argument that there is non compliance with national minimum wage. However, an employer who recovers the cost of replacing lost uniform which was a result of the employee’s negligence is likely to cause less issue due to the employee’s choice in their conduct.

To ensure that national minimum wage is being met, pay and deductions should be continuously reviewed. All employees are entitled to an itemised pay statement, which should clearly set out the net and gross amounts of pay and the amount/nature of any deductions you look to make. If an employee has been paid below the minimum rate then it is advised that payment of arrears is made.

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