Avoiding naming and shaming

20 August 2018

This article was featured in the September 2018 issue of the magazine.

Danny Done, managing director at Portfolio Payroll, reveals recent HMRC activity and explains how employers can avoid NMW underpayments

In their most recent naming and shaming exercise, HM Revenue & Customs (HMRC) have publicly announced the names of 239 employers who were found to have been guilty of breaking national minimum wage (NMW) law. Collectively these organisations will be required to settle £1.44million of back pay owed to 22,400 workers, as well as pay a total of £1.97million in government fines. 

The number of reported incidents, which has increased by 60 since the last figures were released in March 2018, shows that workers are becoming more aware of their rights and subsequently more inclined to blow the whistle on employers that fail to pay them correctly. It is also apparent that this issue is not limited to any particular sector or business type, with culprits ranging from small independent businesses to large national chains. 


...employers should conduct a thorough review of their pay practices to mitigate the risk of substantial fines which accompany NMW offences


In order to avoid failing foul of NMW law employers must familiarise themselves with the pre-existing NMW rates. It is important to ensure correct rates are issued to all workers, especially considering 85 of the 239 organisations were found out for underpaying just one employee. These hourly rates, which change annually in April, currently start at £4.20 for under-18s (providing they are not apprentices) and rise incrementally throughout predetermined age boundaries to £7.83 for individuals aged 25 and over. With this in mind, human resources and payroll departments need to work together to ensure hourly rates are accurately reflected in wage slips as staff progress though the NMW age barriers. Employers may also consider introducing a blanket hourly rate for all staff, perhaps in line with the suggested UK real living wage of £8.75 an hour, to reduce the chances of accidentally underpaying an employee in line with their age bracket. 

One of the main reasons given by employers who failed to pay staff in line with NMW requirements was a lack of understanding around unlawful wage deductions for uniforms. In many recent examples, employers have been seen to issue staff with mandatory uniforms before going on to deduct the cost of these uniforms from their salaries, which having done so meant that staff were ultimately paid less than the NMW. To address this, employers should consider issuing uniforms free of charge where possible or spreading any deductions across several pay checks to ensure individuals do not end up being paid below NMW. 

Another common excuse was that employers did not understand the requirement to pay apprentices a minimum hourly rate. The current apprenticeship rate stands at £3.70 an hour and represents the legal minimum for those who are either under 19, or 19 and over but in the first twelve months of employment. Clients need to be aware that once an apprentice is aged 19 and over and is no longer in the first twelve months of employment, they will become entitled to the minimum wage rate that is applicable for their age, up to and including the national living wage of £7.83 an hour.

Another important consideration that tends to be overlooked by employers is travel time. This should not be confused with the time spent travelling between an employee’s place of residence and their work, but rather the time when a worker is travelling for the purpose of working. Naturally this will not be applicable for all roles; however, where it does apply, employers must pay staff appropriately for this which includes travelling from one work assignment to the next and travelling between the place of work and a place where training is being provided. Time-sheets can help employers appropriately keep track of travel time and ensure staff are being paid a fair wage in line with the NMW requirements. 

Given the government’s continued efforts to protect employees from NMW exploitation, employers should conduct a thorough review of their pay practices to mitigate the risk of substantial fines which accompany NMW offences. Employers should also strongly consider the damage such offences can have on their reputation and the impact this could have on both business sales and the ability to attract talent in the future if left unaddressed.