The UK minimum wage provides the lowest hourly amount that workers by age can be paid by law. On 1^st April 2023 the National Living Wage (NLW) and National Minimum Wage (NMW) increased to the following hourly rates:

• NLW for over 23’s: £10.24

• NMW for those 21-22 years: £10.18

• NMW for 18-20 years: £7.49

• NMW for under 18s: £5.28 

• Apprentice rate: £5.28

Typically care, hospitality and retail are the leading sectors for minimum wage jobs. With inflation and interest rates increasing the pressure on wages is greater than ever. Which is why the recent press reports that large high street retailers such as WH Smith and Marks & Spencer have faced penalties for failing to pay NMW is somewhat surprising. These companies are not alone, it has been reported that more than 200 firms including smaller businesses, have been fined to reimburse workers for breaches to minimum wage requirements that span over 10 years. The government have made it clear that paying the NMW is non-negotiable.

In 2011, the Department for Business Trade (DBT) created a “name and shame” list, naming businesses for NMW violations, with Round 19 published on 21^st June 2023. A total of 202 employers were named. Yet it would seem that some of these employers have not necessarily underpaid an hourly wage deliberately to increase their profits, rather that deductions and payments have taken the hourly rate below NMW. Examples of deductions include:

• Food/meals

• Purchase of clothes to meet dress code requirements

• Uniform

• Salary sacrifice schemes

• Cost of work equipment or personal protective equipment

• Parking permits

WH Smith misinterpreted the rules around uniform, with their own uniform policy requiring staff to buy specific-coloured trousers, skirts and shoes. The cost should have been factored into the NMW calculations or staff reimbursed for the cost, they were not, resulting in a breach.

Other common breaches were unpaid working time including failing to pay overtime, travel time, staff training, as well salaried workers working in excess of their basic hours. Therefore, employers must make sure that all working time is recorded correctly.

Many businesses have claimed that the breaches were not intentional, from misinterpretation of uniform policy to technical issues within the payroll system, the name and shame approach does not differentiate between intentional and unintentional breaches. This highlights the importance of businesses conducting regular internal reviews of working practices to avoid inadvertently paying below NMW.

Whilst the amount of the fines paid has not been published, the government has confirmed that penalties to those in the recent name and shame list were up to 200% of the arrears owed. A stark warning to businesses to ensure that staff are correctly paid in line with the NLW and NMW requirements to avoid HMRC investigations, financial penalties, and damage to reputation by being “named and shamed”.  

Should you require assistance with calculating staff pay, please contact Arvin Sandhu on 01494 521301 or by email.