The government’s latest release of named employers is a timely reminder of how easily technical errors can lead to underpayment and a breach of the national minimum wage (NMW) requirements. Nearly 400 employers, including some high-profile brands, have been issued with significant penalties. This shows how easy it is, even for very well-resourced businesses, to fall foul of what are complex rules concerning payment of the NMW.
With effect from 1 April, the new minimum wage rates came into force, with the top national living wage rate for workers aged 21 and over increasing to £12.71 per hour. HM Revenue and Customs (HMRC) data shows that simple failures to update rates on time remain a recurring cause of underpayment, particularly for younger workers and casual staff. Employers should use the opportunity when updating pay in line with the new rates to ensure that they are fully compliant with the current rules.
Employers should carry out regular NMW health checks to ensure their calculations are accurate and fully compliant. They should periodically review payroll practices against HMRC’s NMW checklist, particularly following rate changes, changes in working patterns or operational adjustments. In particular, employers must ensure that workers are paid for all time that qualifies as working time under the regulations, including pre‑shift activities such as handovers, mandatory training and work‑related travel time. The NMW online calculator is a useful way for employers to check that they are paying the correct amount.
Another common area of non-compliance for employers is in relation to pay deductions. Deductions can easily reduce pay below the NMW, even where employee consent is obtained. Particular risk areas include deductions or payments for uniforms, PPE costs, mandatory training costs or other job‑related expenses. The provision of accommodation to an employee will also impact on the calculation of NMW, with a fixed rate to offset against NMW entitlement. Reviewing any applicable deductions can help reduce the risk of underpayments.
Employers that engage apprentices must also ensure the correct application of apprentice rates for NMW purposes. A significant proportion of breaches arise from paying the apprentice rate to individuals who are not genuine apprentices, continuing to apply the apprentice rate after eligibility ends, or failing to pay apprentices for training time.
Finally, providing clear and practical guidance to managers will reduce the risk of inadvertent technical breaches arising in day‑to‑day working practices. With more frequent naming and shaming of non‑compliant organisations and the recently established Fair Work Agency expected to strengthen enforcement, employers should take particular care in ensuring full compliance with national minimum wage requirements.
Jasmin Sandhu is a solicitor in the employment team at Birketts
