Last month, the Government’s Naming Scheme publicly shamed high-profile employers including WHSmith, Marks & Spencer and Argos for failing to comply with National Minimum Wage (NMW) legislation. The list comprised over 200 employers ranging from big high-street retailers to smaller companies, operating in a variety of sectors, which were all found to have failed to pay the National Minimum Wage.
Collectively, the companies face penalties of nearly £7million. And they will be required to reimburse employees who were underpaid.
Often National Minimum Wage breaches will be unintentional. However, the Government hopes that, by publicly announcing poor payment practices, employers will be encouraged to review their practices and be deterred from breaking the law. A public announcement, of course, would result in social criticism and reputational damage – something no business wants.
Any business, big or small, can be named if HMRC has issued a notice of underpayment. Although a company will be given 28 days to appeal, this is something that all employers need to avoid.
Where are businesses going wrong?
Many businesses fall foul of the rules, sometimes unwittingly.
For example, employers are allowed to make deductions from wages for certain items of expenditure such as uniforms or purchasing tools. However, when these deductions push the actual pay received by workers below the National Minimum Wage, employers will be found to be in breach. The recently published Naming Scheme highlights that expenditure deductions are the most common cause for breaches of the NMW regulations.
What should businesses do?
If you have employees in your business, no matter how many or how few, you should check and double-check that you aren’t making similar mistakes. Review your practices, ensure that employees are actually receiving minimum wage, and urgently correct any errors that you may have made.
If you need to talk it through or get in help, we are always on the end of a phone or email. Just get in touch.