HMRC & NMW

Nearly 500 employers have been fined more than £10m by HMRC for failing to pay the national minimum wage to their employees.

The penalties come as part of the government effort to send a “clear message” that it will not tolerate companies that “shortchange their workers”. Around 42,000 employees will be reimbursed a combined £6m as a result.

EG Group, the service station and convenience store chain co-founded by brothers Mohsin and Zuber Issa, was the biggest offender, failing to pay a combined £824,384 to 3,317 workers. The company said the underpayment was a result of historic payroll issues that have now been rectified, adding that all affected employees were reimbursed.

British Gas owner Centrica failed to pay £167,815 to 356 of its staff, which it also blamed on a technical error. “The total underpayment related primarily to salary sacrifice arrangements and training bonds, rather than take-home pay, and was around £160,000 – our UK annual wage bill is currently around £1.2bn,” a spokesperson for the business said.

High street chain Holland & Barrett was also named among the top 10 worst offenders after it was found to have underpaid 2,551 workers a combined £153,079.  “This was not a case of deliberate underpayment,” a spokesperson said. “The issue stemmed from legacy practices such as requiring team members to wear specific shoes, unpaid training completed at home, and time spent preparing for shifts at our Burton distribution site.” Employees were notified and reimbursed once the issue was identified.

“There is no excuse for workers being cheated out of money they’re owed,” said TUC general secretary Paul Nowak. “It’s bad for workers, families and the economy. That’s why the government’s new Fair Work Agency must be properly resourced – it has a vital role to play in ensuring employers play by the rules.” The government’s Fair Work Agency, which is set to come into operation from next year, will be tasked with enforcing compliance with labour laws, including payment of the national minimum wage. Matthew Taylor, chief executive of the NHS Confederation, was announced as chair of the agency last week.

The most common downfalls to this complex area of legislation take place in the form of the incorrect rate being paid to apprentices and non-payment for working time – which we have found to be the case too with our clients.  As employers we would urge you to cross check the minimum wage rates annually against the age of your apprentices but also for your young workers.  In terms of working time, record all hours worked accurately and remember that holiday pay should be calculated on the basis of the average rate per hour for all hours worked over the 52 paid weeks immediately prior to the holiday .

Which deductions affect pay for minimum wage purposes?

In general, deductions will reduce pay for NMW/NLW purposes if they:

• relate to costs connected with the employment; or
• are made for the employer’s use and benefit.

If a deduction is made for items necessary for the job, such as a uniform, this will reduce the worker’s pay for minimum wage calculations. However, not all deductions affect minimum wage calculations. Any amounts that are a worker’s personal liability but are simply paid to a third party on their behalf will not be deducted from pay for NMW/NLW purposes. Examples of deductions that do not reduce pay for minimum wage purposes include:

• Income Tax and National Insurance Contributions.
• Student loans repayments.
• Employee pension contributions (other than pension contributions made under salary sacrifice arrangements).
• Overpayment of wages made by mistake.

HMRC list some further exceptions in their National Minimum Wage manual.