Is now the right time to be discussing the National Minimum Wage?

Is now the right time to be discussing the National Minimum Wage? Share

With the new year seeing yet more price rises for consumers, and the impending uncertainty of Brexit causing financial uncertainty in many quarters, changes to national minimum wage legislation seems to be a topic creeping into more and more conversations. But what impact will that have on businesses already struggling to manage their bottom line?

Is the current system working?

There have been several stories in recent years regarding employers who have failed in their duty to pay their workers the National Minimum Wage. Whilst many of these centre around employers who have deliberately tried to avoid paying the prescribed rate to their workers, several more relate to technical misunderstandings.

Supermarket chain Iceland were the latest big company to come under fire for minimum wage breaches, and in light of this case, the government has agreed (following an intervention of the Public Accounts Committee) to re-visit the rules to see if these need to be re-drafted to remove some of the complexity, and to avoid some of the potential technical pitfalls.

At present there are two significant areas which could create confusion:

The engagement of workers

We have seen a significant number of cases being taken against those who engage self-employed workers who, given the terms of their contract, have been considered ‘workers’—and on that basis entitled to the National Minimum Wage. Such firms include include Pimlico Plumbers, Addison Lee, and Uber. Usually, when this matter is disputed, the Courts have found a worker arrangement to apply.

The Matthew Taylor review on the gig economy recommends tightening up the rules in this area, as well as the possible introduction of increased regulation, including more rights for workers who are considered to be ‘dependent contractors’.

If your organisation is regularly engaging self-employed workers in personal contracts, you need to take diligent checks as to whether that person undertaking the work could be considered a ‘worker’. An HR specialist will be able to advise if you are unsure, and the current case against Iceland might be enough to encourage you to do this!

Deductions from pay

Speaking of Iceland, there have been many reports recently where workers have had deductions from their pay—which consequently took them below the National Minimum Wage.

It is important to think carefully about any deductions that your organisation may be enforcing on workers, and whether they impact on the National Minimum Wage. Such deductions may be for materials or tools needed for the work, clothing, and car leasing. This is an area that is likely to be carefully considered at the time of a National Minimum Wage review by HMRC.

For many, whilst the penalties for breaching the National Minimum Wage are significant, the fear of being named and shamed can cause further concern. Whilst there is also the threat of being prosecuted or barred from public office, these threats only impact on those who have deliberately attempted to avoid the rules.

Given the significant level of HMRC activity in undertaking compliance reviews, coupled with the efforts of trade unions and individual workers to report potential breaches, not to mention the as yet unknown consequences Brexit may bring, making sure your organisation is on top of the rules is definitely recommended.

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