It is all too easy to inadvertently fall foul of the National Minimum Wage (NMW) and National Living Wage (NLW) rates and with the repercussions for doing so quite severe, including naming and shaming, it is important to review this on a regular basis.
The published ‘naming and shaming’ lists have always been topped by large well-known names, Argos being the latest with underpayments totalling £1.9 million. However, in the past, these lists have seen hotels and restaurants in the top 4 offenders with arrears of over £30,000 each.
You can view the latest published list here
So what factors can be contributing to these underpayments? Two that spring to mind in the tourism and hospitality sector are tips and deductions.
Whilst tips are taxable, and may even be paid as part of the pay packet they do not count towards NMW or NLW.
This seems to be widely misunderstood and HMRC have commented that this is one of the main excuses they receive from employers found to be paying at rates below NMW or NLW.
Deductions from Salary
Another scenario encountered by HMRC on a regular basis is employers taking deductions from employee’s salary to cover costs like uniforms.
Whilst there may be a contractual agreement that says as the employer you can deduct the cost of the uniform from the individuals pay, the general rule is that a deduction (including salary sacrifice) cannot reduce the employees pay below the NMW or NLW.
One exception to this rule is the repayment of any shortfall in a till (where your employee is contractually obliged to make up the difference). Whilst in this scenario, the pay can be reduced below the NMW or NLW, the deduction made can be no more than 10% of the gross pay in that period.
If you have any questions or would like to speak to us about NMW or NLW in more detail, please contact Hannah Farmborough or call on 0207 429 4147 to be put in contact with a member of our Hospitality and Tourism team.
This article originally appeared on the blog of our member firm, Larking Gowen.