Where are employers getting it wrong with national minimum wage?

The 20th naming and shaming of employers who have failed to pay the minimum wage was published recently and, once again, it includes all sizes of employer up to and including High Street brand names.  According to the published figures, over 172,000 workers were left out of pocket, with employers ordered to repay nearly £16 million in unpaid wages plus additional financial penalties.

While some of these employers may be unscrupulous and wholly aware that they are not paying the minimum wage, many of the underpayments are unintentional. So where are employers getting it wrong?

Common mistakes

• Placing workers in the wrong minimum wage category (such as wrongly classifying a worker as an apprentice).
• Failing to take note of annual increases or worker's birthdays that trigger an increased rate.
• Failing to pay for working time at the start or end of shifts (e.g. where an employee is required to change in and out of protective clothing at the beginning or end of a shift).
• Making deductions for clothing or other costs incurred by workers.
• Failing to distinguish between travel time to and from work (which need not be paid) and travel time for the purposes of work (which should be paid).
• Failing to reimburse workers for expenses or costs incurred as part of their job.
• Failing to pay a salaried hours worker for hours in excess of basic hours.
• Not dealing appropriately with salary sacrifice - this could include car schemes, cycle to work schemes or pensions.

This year the Educational Bulletin published alongside the list of employers who failed to pay minimum wage, focuses on reductions in salary, such as salary sacrifice, as well as providing more statistics on the breaches that had occurred. Salary sacrifice is not a term that is recognised in NMW legislation, and the reduction in pay often results in a lower amount being considered for NMW purposes. It does not matter that the reduction is being made in return for some form of benefit.

What do employers need to do?

Employers unintentionally failing to pay workers minimum wage is often attributable to failing to properly monitor working hours and a lack of understanding about when certain deductions will bring pay below the national minimum wage. Having reliable systems in place to ensure working hours are properly recorded will reduce that risk. Those involved with payroll need to be educated on what counts as pay for minimum wage purposes, and what will result in a reduction that will lower pay below the relevant minimum wage level. Guidance on calculating the minimum wage is available here.

Minimum wage rates for 2024/25

From 1 April new minimum wage rates take effect. These are:-