1. Deductions from pay
Over a third of employers breached NMW for reductions or deductions which brought pay below NMW. These include, for example, salary reductions and deductions due to:
- Meals;
- Parking permits / travel costs;
- Training costs;
- Work equipment or personal protective equipment costs;
- Uniform and workers purchasing clothing to meet dress codes;
- Christmas savings schemes;
- Childcare costs; and
- Salary sacrifice schemes such as cycle to work and pension
These breaches demonstrate the counterintuitive and technical nature of some of the NMW rules. For example, some employers may be surprised to learn that reductions or deductions employees have voluntarily agreed – such as for a Christmas savings or salary sacrifice schemes – can cause NMW issues. It’s therefore important to implement and review policies (whether formally communicated or informally agreed) to identify relevant NMW risks and incorporate appropriate checks and controls within payroll and HR systems to ensure these are minimised.
2. Unpaid working time
The second key factor was unpaid working time, which covered almost a third of employers on the list. HMRC identified unpaid working time in the following circumstances:
- Additional work before and/or after a shift;
- Travel time;
- Rounding clock-in time to the nearest hour, half hour or 5 minutes;
- Overtime;
- Working more than ‘regular’ contracted hours without additional pay;
- Delays in ad hoc payments;
- Training time;
- Trial shift; and
- Salaried hours workers working in excess of basic hours.
Employers should therefore ensure that their policies around recording and paying all working time are clear, compliant, and subject to robust controls, audits, and testing.
It’s also important to appreciate that certain groups of higher paid employees can still present an NMW compliance risk, and take care to identify and monitor those groups appropriately (see our earlier article for an example concerning salaried workers earning £50,000 per year).
3. Incorrect apprenticeship rates
Several employers misapplied the apprenticeship rules, failing to pay workers aged 19 and above the appropriate rate on completion of the first year of apprenticeship, incorrectly classifying apprentices and therefore paying below NMW, or failing to increase pay on completion of an apprenticeship.
Apprenticeship breaches are typically driven by a lack of controls and checks within payroll and HR: these can be avoided with careful monitoring and transparency between teams.
4. Other factors
Other breaches of NMW included:
- Failure to pay the uprated minimum wage (for example when a worker reaches a certain age or in line with the 1 April increase);
- Failure to correctly apply the accommodation offset;
- Incorrect categorisation of the type of work undertaken (e.g. salaried or unmeasured); and
- Incorrect worker status, for example, treating a “worker” as self-employed or engaging an intern on an unpaid basis, who should really be classified as a worker with the associated NMW and other employment law rights
These issues stem from a misunderstanding of how to categorise the workforce (the starting point for NMW compliance) and systems issues which can easily be overlooked. Even if your business is familiar with the rules and has systems and checks in place, it’s always worth an independent review to ensure your compliance framework is fully robust.
