21 February 2024
Share Print

UK National Minimum Wage Breaches – Is there truly shame?

To The Point
(3 min read)

Yesterday the Department for Business and Trade ('DBT') issued a press release "naming and shaming" over 500 organisations that had breached UK National Minimum Wage ('NMW') legislation.  The largest underpayment reported on the list was in excess of £5m.  This article looks at the complexities of the NMW legislation.

I often consider the phrase "naming and shaming" in an NMW context to be unfair.  The legislation in respect of NMW is incredibly complex, in particular, the NMW Regulations.  I would challenge anybody, including lawyers, who doesn’t have a good working knowledge of the Regulations to review the contract of employment and 12 months' payslips of a worker who is paid at or near the applicable NMW rate and determine, with confidence, that there is compliance. Underpayments, in our experience are commonly a result of a misunderstanding of the law rather than any deliberate failure by an employer to comply with NMW.

The DBT also yesterday issued an Educational Bulletin, which rather illuminates my point of the complexity of the legislation.  35% of those appearing on the list in this round fell foul because of reductions/deductions in pay.  In our experience these tend to be caused by very technical legal issues where arguably the worker hasn’t suffered any loss, such as clothing worn to work and the operation of Salary Sacrifice Schemes (including pensions, childcare, cycle to work schemes).  We often see NMW breaches where employees working towards retirement wish to take the tax advantages of sacrificing a large proportion of pay into a pension.

31% failed to pay workers for all their hours of work.  In our experience what constitutes working time is often not what one might expect. There are often issues determining when a worker actually starts work.  Also employers often face difficulty in proving the hours of work.  Ask yourself if you have any accurate record of hours of work.  Would you consider your understanding of the hours staff work accords with their perception?

In addition, many underpayments were caused by errors in the classification of the working type under the NMW Regulations.  I have significant sympathy for such employers; determining classification of working type is extremely complex and a simple payment to a worker can make all the difference.

Maybe it is time to cease "naming and shaming" those employers that are caught out by the complexity of the legislation and reserve the list for those that seek to breach the legislation or are negligent.  I suspect if that approach was taken the list would significantly reduce.  The Educational Bulletin is helpful but the legislation is far too complex, which will become all the more difficult for employers to stay within as the NMW rates increase.

Key facts

Next steps

We have a team of experienced experts that assist employers in understanding their obligations in respect of NMW.

For more information about our NMW services or to schedule a meeting with one of our employment law experts, please contact Andrew Moore.

To the Point 

Subscribe for legal insights, industry updates, events and webinars to your inbox

Sign up now