Employers must ensure minimum wage obligations are met after over 500 firms named for breaches

Gillian Harrington, employment law expert at Pinsent Masons, was commenting after the UK government and HM Revenue and Customs (HMRC) “named and shamed” 518 employers for failing to pay their workers the national minimum wage. 

The employers responsible for the underpayments faced financial penalties of up to 200% of their underpayments.

Harrington said: “Whilst most employers comply with their obligation to pay their employees the national minimum wage, the latest round of ‘naming and shaming’ shows that employers may not even be aware they are breaching requirements. Publicity, penalties and unintentional pitfalls mean employers should regularly audit for national minimum wage compliance.”

A total of 34% of the employers recently named by HMRC had wrongly made deductions from workers’ wages which took their payments below the national minimum wage. Common deductions which employers often make which could see workers’ wages falling below national minimum wage include deductions in respect of meals, parking permits and travel costs, work equipment, stock or till shortages, training costs, Christmas savings schemes, uniform or dress codes, childcare costs, and salary sacrifice schemes.

Harrington said: “Whether a deduction is a regular or a one-off feature of payslips, the impact on minimum wage compliance should be assessed. If an employer operates a salary sacrifice scheme, such as cycle to work, pension and employer benefit schemes, it is the pay after the salary sacrifice which counts for national minimum wage purposes and payroll should be set up to prevent workers, especially lower paid workers, from sacrificing their pay to below minimum wage.

Further, 31% of employers named by the government failed to pay workers correctly for their working time. This included failures arising from additional work before and after a shift, rounding clock-in time to the nearest segment, underpaid travel time, payments for “regular” hours or day rates despite longer hours worked, time for mandatory training, and underpaid time worked during sleep-in shifts, trial shifts, or overtime.

“These are the kind of mistakes that a systematic review of working practices and how workers are renumerated may avoid,” said Harrington. “If there is no buffer in the wage rate to absorb these kinds of errors, an employer can fall into a national minimum wage breach.”

Failure to pay the correct rate to apprentices was another issue highlighted, with 22% of employers listed making this mistake. This arose from errors such as incorrect classifications or workers finishing apprenticeships and not being moved to higher rates. Other avoidable pitfalls included failure to increase worker’s correct pay when they became eligible for a new minimum wage rate following a birthday and failures to uplift wages after there was an increase to the minimum wages rates on 1 April.

The “naming and shaming” comes as the Office of National Statistics (ONS) also published its latest report on average weekly earnings, showing that wage growth is slowing down.

The ONS earnings growth rate report is the first published since the rises to minimum wage and employer national insurance contributions in April. The ONS observes that the annual growth in employees’ average earnings was 5.2% in February to April for regular earnings, excluding bonuses, and 5.3% for total earnings, including bonuses. This is down from 5.5% and 5.6% respectively for the previous three month period. However, the ONS continue to describe growth rates as remaining “relatively strong”.

However, the Low-Pay Commission (LPC) is currently consulting on the affordability of an increase to a national living wage rate increase of between £12.50 o £12.80, currently £12.21, next April. It will also continue with its remit from the government to factor the cost of living and the objective of eliminating age bandings in minimum wage rates.