Why did so many Companies get caught NOT paying the National Minimum Wage?

Why did major firms get caught not paying the national minimum wage?

More than 200 companies were outed by the government last week (20 June) for failing to pay staff the minimum wage. In its latest ‘name and shame’ list, 202 employers were found to have failed to pay their workers almost £5m in a clear breach of the national minimum wage (NMW) law.

The list includes firms of all sizes and from various sectors, including football clubs and food manufacturers, but some of the big companies named included WHSmith, Argos and Marks & Spencer, which were all in breach of the law between 2017 and 2019.

In total, the named companies were told to reimburse more than 63,000 workers, and together pay £7m in fines to HMRC.

Route 1 Recruitment & Training Ltd understand that the rules around the payment of NMW are “complicated” and it is not simply a case of looking at an hourly rate an individual is paid and that there are different deductions that can be taken into account. There is always the risk that sometimes employers inadvertently break the rules without realising it. From an employer's perspective, it is about knowing the rules and knowing how specifically those rules will apply within your own organisation depending on how your payroll was set up and how businesses handle things like uniform entitlement and provision of equipment for workers at work.

What were the most common breaches?

When looking at the details of the breaches, many appear to be either unintentional or have already been resolved. Two fifths (39 per cent) of the firms were on the list for deducting pay from workers’ wages and failing to pay workers correctly for their working time.

Another 21 per cent were on the list for paying the incorrect apprenticeship rate. This corresponds to the same report in 2021 when 19 per cent were on the list for the same reason.

With the same, if not similar, discrepancies cropping up each year, and seemingly affecting some of the UK’s largest employers – which no doubt will have big payroll teams managing the larger workforces – how do firms get caught up in something so basic?

NMW compliance is extremely important, but it can be unintentionally breached for seemingly minor process errors, however, this does not absolve employers of the responsibility - The reputational damage this publication can do to any business is high. During a cost-of-living crisis, the impact this can have on workers is also a huge factor contributing to the uproar in the media. Something no company wants.

There are four key areas where employers typically fall foul of NMW legislation, and it would be advisable for companies to look at your own processes to ensure that you are compliant. These include:

• Believing that all workers are salaried. Employers should identify the category of work being done.

• Salary sacrifice schemes – HMRC considers post-sacrifice pay as what counts for NMW, so if someone is salary sacrificing for, say, childcare or a cycle to work scheme, then the employer must look at their pay after deductions to ensure it still meets the NMW.

• Other deductions - Making deductions from wages for things that an employee has bought from you; for example, uniforms or tools or other employee benefits schemes all reduce take-home pay and need to be considered for NMW purposes.

• Apprenticeships pay - Employers must remember it increases when apprentices turn 19 and are in their second year – they no longer get the apprenticeship rate, they get normal NMW.

Contact Route 1 NOW on 01924 261 636 to see how we can help to ensure compliance in all areas of your business.

WE ARE NOT YOUR USUAL RECRUITMENT AGENCY ……….