National Minimum Wage breaches face massive fines

Can you afford negative press, and HMRC fines of up to £20,000 per underpaid worker for breaching National Minimum wage obligations? These fines will be on top of reimbursing the underpaid wages.

At the end of September, HMRC reported that a record number of employers breached the National Minimum Wage (NMW) regulations during the year of 2017/2018. The total underpaid amounted to a total of £15.6 million and included over 200,000 workers. These figures show that HMRC are doubling down on enforcement of the NMW regulations and it reiterates how important it is for employers to get the payment of NMW right to avoid the risk.

NMW regulations are complicated for employers to navigate and even the issue of who is entitled to be paid the minimum wage is sometimes not a clear cut issue.

In recent years the ever evolving nature of working relationships and the gig economy have caused problems even at a basic level. This was shown in the recent cases on worker status involving Uber and Pimlico Plumbers who engaged individuals on a purportedly self-employed basis but were then found to be workers or even employees. Cases like this highlight the dangers of getting the categorisation of your workforce right because workers and employees are both entitled to be paid the NMW.

Even if you have categorised your workforce correctly, further issues can arise within particular sectors of work. In their press release, HMRC confirmed that they are focusing their enforcement powers in particular on the social care, retail, commercial warehousing and gig economy sectors. Any employers within these industries in particular should review their payroll and take advice before ending up under the microscope of HMRC investigation. Within these industries, extra care should be taken when assessing things such as: working time, overtime payments and working hours for the purposes of the NMW. Case law in Hamilton House Medical v Hillier has confirmed that the premium on any overtime payments do not count towards NMW calculations. For example if an employee had an hourly rate of £4 and the overtime rate was £7, only the £4 normal rate, not the premium would count for NMW purposes. It has also been confirmed in the recent case of Royal Mencap Society v Tomlinson-Blake that “sleep – in” workers who are required to be available for work but not actually working are not entitled to be paid the NMW. This area of law of complicated and has changed rapidly in recent years so it is important to seek advice for any issue you are unsure of.

As well as these types of workers it is important to note that there are certain types of employees that have specific wage regulations for employers to be aware of. These include apprentices and agricultural workers who are subject to different rates of NMW than the standard rate (currently £7.83 for employees over 25).

So why is it so important for employers to get it right with minimum wage? Other than the negative press that breaching the regulations can bring, HMRC can impose fines of up to £20,000 per underpaid worker. This is on top of the reimbursement of the underpaid wages to the employee. The recent press release makes it clear that HMRC are doubling down on enforcement so the risk for employers is higher than ever. If you have any atypical workers or have any concerns about the NMW it is important that you take advice sooner rather than later to avoid these issues.

MacRoberts’ employment law team is the longest established specialist team in Scotland. We advise in all aspects of employment law including national minimum wage issues. For more information about any of the above or for specific advice, please contact, or call 0141 303 1100 and ask to speak to a member of our specialist employment law team.

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