Latest list of employers named and shamed for failing to pay the National Minimum Wage

The Department for Business and Trade has published the names of 200 employers who failed to pay their workers the National Minimum Wage. As a result, HMRC has issued financial penalties totalling nearly £7m for underpayment of wages after 63,000 workers were left out of pocket. The employers included high street retailers such as WHSmith, Marks & Spencer and Lloyds Pharmacy. This has again been picked up by national media, with potential reputational damage to the named businesses. The full list can be found here.

How can your business ensure it meets its obligations to pay at least the National Minimum Wage and avoid being named and shamed?

The National Minimum Wage

First, you need to understand the National Minimum Wage and its obligations. The National Minimum Wage was introduced on 1 April 1999 by the National Minimum Wage Act 1998. All workers in the UK who have ceased to be of compulsory school age qualify to be paid a rate not less than the National Minimum Wage.

The legislation specifically applies to workers, being a very wide definition that seeks to only exclude those individuals that are genuinely self-employed. It includes foreign workers while working in the UK, regardless of how long that period of time may be. Importantly, employers and employees cannot opt out of the National Minimum Wage.

How much is it?

The rate of the National Minimum Wage applicable for a particular worker is dependent upon which category they fall under:

• For workers aged 23 years and above the rate is currently £10.42 per hour;
• For workers aged 21 and 22 the rate is currently £10.18 per hour;
• For workers aged 18 to 20 the rate is currently £7.49 per hour;
• For workers aged under 18 the rate is currently £5.28 per hour; and
• For apprentices the rate is currently £5.28 per hour.

Calculating the National Minimum Wage

The rate of pay a worker receives is calculated by taking pay divided by the working time. However, in calculating the worker’s rate of pay an employer must be aware of the specific rules in relation to:

• What counts towards pay
• Deductions that must be made from pay
• What period of time the rate is calculated over
• What counts towards working time

Knowing these rules is necessary when considering how to deal with issues such as workers paying for their own uniform, provision of accommodation, or the time a worker spends travelling or on call. Examining the latest action, many of the companies’ explanation for their failure is linked to uniform costs, and therefore this is a particular area upon which employers should take specific advice.

Enforcement of the National Minimum Wage

Employers have a duty to keep records of the hours worked by their workers and the remuneration they have been paid. A worker has the right to see these records, and can take a copy, to establish if they have received the National Minimum Wage. If the worker identifies that they have been underpaid they can:

• Contact HMRC confidentially to raise a complaint; and/or
• Raise a claim at the employment tribunal for unlawful deduction of wages. Alternatively, they can raise a breach of contract claim at either the employment tribunal or a sheriff/county court.

Separately, a HMRC enforcement officer may also inspect an employer’s National Minimum Wage records, or can require them to be produced on reasonable notice. It is a criminal offence to refuse.

If an underpayment is identified, the HMRC penalty is set at 200% of the total underpayment of the National Minimum Wage. The minimum penalty notice is £100 and the maximum penalty is £20,000 per worker, though an employer can receive multiple notices per worker.

Consequences of failing to pay the National Minimum Wage

Along with the financial consequences, an employer may also face public exposure on the matter, which is clearly an undesirable prospect. In order to avoid being on the receiving end of this double penalty employers must ensure they are compliant in paying workers at least the National Minimum Wage. If you have any concerns that your business may not be compliant with the legislative requirements, please contact our employment team.