On 23 May 2022, the Government produced its report on the enforcement of national minimum wage and national living wage.
As a firm we have been advising employers on NMW compliance for almost 15 years now (and we have almost 100 years of experience between us). We are therefore very aware that mistakes with ensuring full compliance are easy to make. This is particularly the case in the social care and housing sectors, where employees often have complex working arrangements that include on-call, travel and waiting times; and the education sector where staff are on terms time contracts.
Having been relatively quiet during the peak of the pandemic, HMRC is picking up their inspection activities and we anticipate an increased number of employers will be inspected for NMW compliance over the next few months. We are also aware that HMRC is offering, particularly in the social care sector, auditing programmes with HMRC officers reviewing employers’ pay arrangements and highlighting areas of non-compliance that providers will need to act upon.
Before the HMRC inspector knocks on your door, we would strongly recommend that all employers review their working and pay practices to ensure that innocent mistakes have not been made that could lead to significant liabilities, penalties and the organisation being named and shamed.
From our experience, the most common mistakes made and issues that employers need to be mindful of include:
- Records – The burden of proof in NMW claims lies with the employer with the effect that compliance officers will presume that a worker has been paid at a rate below NMW unless the employer can show otherwise. Employers therefore must keep records that will enable them to prove that they have discharged their liability. Although there is no specific format in which such information must be held, employers must ensure that data on all working time and pay is available and easily accessible. Information on time spent working including travelling, waiting time, time spent on-call, and training including any time learning at home must be available.
- Status – Employers often believe that they engage self-employed consultants to whom NMW entitlement does not apply. Mislabelling of working arrangements, where consultants are in fact workers, can lead to NMW underpayments.
- Type of work – There are four different types of work for NMW purposes – salaried, time, output and unmeasured. The most common mistake that we see is employers miscategorising workers as salaried – it is not sufficient to treat the person as performing salaried work just because they are paid a salary. For the worker to be doing salaried work additional conditions must be met and workers, who work irregular weekly work patterns, are unlikely to meet those conditions. Compliance with NMW is assessed differently for hourly rate paid workers and salaried workers, and therefore miscategorising workers can lead to significant NMW underpayments.
- Working time – Although all clients that we work with pay staff for their actual working time, some employers fail to take account of additional time that counts as working time for NMW purposes. This can include induction training, supervision and long-distance learning, commuting, travelling and waiting time, as well as on-call time. For example, most of the time workers spend travelling between client visits, or waiting to start work or the visit, counts as working time.
- Counting incorrect payments – Not all payments made to workers count towards the calculation of the NMW. In particular, where paying enhanced rates for unsocial working hours, or higher rates for shorter visits, employers need to be aware that generally the amount that exceeds the lowest rate that would be payable is not taken into account. Unless appropriate contractual arrangements exist.
- Deductions – Although there are certain deductions from pay which will not affect NMW compliance, the majority of deductions made from workers’ pay will reduce pay for NMW purposes. For example, a deduction to meet the charge for a DBS, Disclosure Scotland or Access NI check, will not reduce pay, but an administration charge to carry out the check on the workers’ behalf would reduce the pay for NMW compliance. If you require workers to wear specific uniforms and staff are required to purchase those, then any deductions made from pay or payments out by the worker in respect of such uniforms, will reduce the NMW pay.
- Expenses – Not reimbursing travel expenses, such as car mileage or bus and train fares, can bring workers’ average pay below the NMW. In addition, any expenses paid to workers, do not count towards the calculation of the NMW compliance.
We encourage all employers to undertake an annual audit of their NMW compliance. In light of HMRC increasing their inspections, our advice would be to promptly invest in some internal resources to undertake NMW reviews and seek external audit support or advice in relation to any specific concerns. With over 100 years of experience between us in advising on NMW issues, the employment team at Anthony Collins Solicitors, would be happy to assist in helping your organisation achieve compliance.
For more information
If you would like to find out more about the national minimum wage and how to ensure appliance, please contact Anna Dabek.
