Earlier this month BEIS released the latest National Minimum Wage (NMW) "naming and shaming" list of businesses that were found to be in breach of the NMW regulations. 

Over 200 businesses were listed with £1.2m in underpayments and nearly £2m in penalties.

The majority of the underpayments identified resulted from issues that we commonly see arise when determining NMW compliance, including the application of dress code policies and the identification of additional working time that the employer had not understood to constitute working time.  Depending on the requirements of a dress code, the cost items that they wear for work can be considered to be a deduction from pay for the purposes of calculating NMW.  In addition, the determination of working hours is not as straight forward as it may appear and is not limited to the time workers actually spend performing the particular duties of the role.  For example, the time spent waiting to clock on to a shift can constitute working time.  Other incidental tasks can also be working time such as preparing for work (for example, changing into PPE; logging onto systems).  HMRC can review NMW compliance going back six years, in relation to all workers engaged during that period.  Where underpayments are identified the HMRC can hit the employer with a fine of up to 200% of the monies deemed to be owed.

The list from BEIS contains a number of well-known and respected companies.  It arguably demonstrates that the majority of the underpayments found are not as a result of any deliberate failure to pay NMW or due to ignorance of the law but rather arise from the complexity of the regulations that govern NMW.  For example, we often find that employers who are seeking to provide benefits to lower paid staff inadvertently fall foul of the regulations. 

The government has recently announced a significant rise to the National Living Wage (NLW) from April 2022. It is the biggest increase to the National Living Wage since its introduction and is consistent with the government's aim that the NLW will equal two-thirds of median earnings by 2024.

It should also be noted that since 2015, the budget for NMW enforcement has doubled with the government having ordered employers to repay over £100 million to 1 million workers.

Key contact

Andrew Moore

Andrew Moore

Managing Associate, Employment

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