National minimum wage

Where a worker is paid National Minimum Wage (NMW), certain deductions to their salary are allowable by law and do not reduce their wages below NMW. Some examples include tax and National Insurance as well as deduction for repayments of employee loans and recovery of accidental overpayments. However, calculating such deductions and differentiating between those allowed and not allowed, can sometimes be complex and some big names, such as Wagamama and TGI’s, have recently fallen foul of these rules.

Who is eligible to receive NMW?

All workers over compulsory school age are entitled to receive NMW, the amount of which varies depending on their age and the type of work they do. Ultimately, they must be working under a contract of employment or a contract to personally perform work or services for another. For the latest NMW rates please visit the gov.uk website.

How did Wagamama fall foul?

Wagamama’s front of house staff were required to wear black jeans or skirts at work, which had to be purchased by the staff members themselves. HMRC considered this to be the same as asking the staff to purchase their own uniform (a deduction which can reduce pay to below NMW level) which in turn resulted in some staff not receiving the NMW.

However, it should be noted that this doesn’t affect purchases by a worker in the course of their employment which the worker makes freely of their own accord. For example, if a chef is provided with an allowance of £100 to purchase knives but they elect to buy a more premium set for £200 the additional £100 spent will not be a deduction for the purposes of determining whether the individual has been paid NMW. This being said the allowance must be reasonable.

What should you do?

It’s vital that where you have workers who are required to purchase uniform or tools for work, this doesn’t reduce earnings below the relevant NMW threshold. Should these requirements result in the worker’s income being below NMW, then they should be provided with a reasonable allowance to purchase the required tools or items or alternatively, they should be provided with the appropriate uniform or tools that are required for their role at no cost. It is important to note that, where workers receive tips as part of their employment, these cannot be taken into account when deciding whether they have received NMW, regardless of whether this is paid within their pay packet or whether they receive it direct from customers.

Finally, failure to comply with NMW obligations could result in an investigation by HMRC and, if found guilty, HMRC can impose sanctions of up to £20,000 per affected worker, including a 100% uplift in any monies owed. In extreme cases, employers may face criminal sanctions including sanctions personally against directors. In addition, the Government has now begun “naming and shaming” employers who have been found to have underpaid NMW. This is in addition to any claim that could be brought against you by the worker for an unlawful deduction from wages and/or breach of contract.