National Minimum Wage Traps to Avoid
National minimum wage rates are due to rise again on 1st April 2019. The new rates will be as follows:
|Age 25 +||£8.21 per hour|
|Age 21 -24||£7.70 per hour|
|Age 18 to 20||£6.15 per hour|
|Age under 18||£4.35 per hour|
|Apprentice aged below 19 in the first year||£3.90 per hour|
|Apprentice aged 19 or over and past first year||Rate according to age as above|
While you may think you have done your sums correctly, there are some traps you could fall into:
Deductions from salary
A deduction should not take an employee’s pay below minimum wage, unless it is for:
- tax or National Insurance
- repayment of a loan, salary advance or accidental overpayment of wages
- staff accommodation
- something they’ve done and their contract says they’re liable for, such as a shortfall in the till
- their own use, eg pension contributions
Iceland gave their employees the chance to contribute to a Christmas savings scheme. It was entirely voluntary. However, HMRC claims the scheme breaches minimum wage laws. If the case goes against them, Iceland potentially face a bill of up to £21m, plus fines.
Take extra care if you charge your staff for uniforms or expect them to provide their own. Wagamama required staff to wear their own black jeans or or a black skirt, with a branded black top. Staff were found to be providing their own uniforms. This effectively reduced their pay below minimum wage. Other hospitality chains have had similar issues.
Tips, however they are paid, do not count towards minimum wage. They are, however, taxable.
Security checks at Sports Direct’s distribution centre took an average of 11 minutes each day to complete. These checks took place after a shift had ended. As they were mandatory, they were deemed working time. Sports Direct were found to be paying below minimum wage.
The minimum wage for overnight care workers has been the subject of recent court action. The question is, if someone is sleeping over night in case care is needed, are they working? Initially HRMC said they should be paid minimum wage for all hours as they were at work. This was been overturned on appeal but may not be the end of the matter.
What if I don’t pay Minimum Wage?
You can be fined up to £20,000 per employee. You can also be “named and shamed” on a Government website. Not only will this damage your pocket, it will also damage your reputation as an employer.
It’s not just the simple maths of calculating your hourly rate. It is important to check your working practices aren’t unwittingly taking your employees below minimum wage. Please contact me to discuss this further.