NMW – the best/worst mistakes

25 April 2019

This article was featured in the May 2019 issue of the magazine.

Tim Bridgett, employment taxes senior manager at PSTAX, reviews the mistakes and provides commentary

In December 2018, HM Revenue & Customs’ (HMRC’s) Employer Bulletin (http://bit.ly/2G75XaO) included a very interesting a list of the top ten mistakes that employers make when dealing with national minimum wage (‘NMW’) matters, that can potentially give rise to NMW underpayments. 

This list has been the source of much discussion within our business and we have brought it to the attention of many of our public sector clients. We have reproduced HMRC’s list below, together with our additional comments.


1. Failure to apply the annual minimum wage rate increase as they go up each year on 1 April – It is usually known well in advance that the NMW rates increase in April each year. There should be no excuse if an employer misses these increases. The previous and current rates are shown in the table below.

2. Missed birthdays as employees turn 18, 21 or 25 years old and move from one NMW rate to another – Including an employee’s date of birth is one of the many requirements of real time information and so this should be an inexcusable error.

3. Paying the apprentice rate to somebody who isn’t actually an apprentice – Recognised apprentices must be engaged under a contract of apprenticeship (or an apprenticeship agreement) and undergo an element of structured training. It is important to note that apprentices should be paid the NMW for time they spend training or studying as part of their apprenticeship, in addition to time they spend working.

4. Continuing to pay the apprentice rate for too long – The apprentice rate only applies to apprentices who are under the age of 19, or if aged 19 or over within the first year of their apprenticeship. 

As an example, an apprentice aged 22 who has completed the first year of their apprenticeship would be entitled to a minimum hourly rate of £7.70 from April 2019.

5. Making wage deductions for items or expenses that are connected with the job – Any deduction or payment from the worker in respect of expenses incurred in connection with his or her employment will always reduce NMW pay. This could include, for example, safety clothing, uniforms, safety boots, tools etc. Where there is a requirement by the employer for the employee to obtain/provide equipment for their job, pay will be reduced for minimum wage if either:

  • the employer makes a deduction from the worker’s pay to meet the costs of any equipment, or

  • the worker makes a payment themselves to either the employer, or to a third party, in order to purchase the equipment.

If there is no requirement by the employer – and there is no deduction from pay – then any purchases by the employee will be their own choice and will not reduce minimum wage pay.

6. Making wage deductions that are deemed to be for the employer’s ‘own use or benefit’ – For example, this could include a Christmas club saving scheme. It doesn’t matter that the worker can choose to buy into the scheme and the employer doesn’t have to make a profit from it. In January of this year, the frozen food store, Iceland, encountered problems with this issue and were landed with underpayments amounting to £21,000,000 along with possible penalties which could double this figure. Additionally, the company was caught out as HMRC insisted that Iceland employees should be reimbursed for their work footwear because the staff guidance confirms that ‘sensible shoes’ should be worn. This case continues.

7. Charging a worker more than the stated offset rate for living accommodation, currently £52.85 – Where appropriate, deductions for accommodation will count towards the NMW calculations where they are made from net pay, gross pay, or even directly to the employer from the employee’s bank account. Where the deductions are higher than the offset rates, then the difference is taken off the worker’s pay for NMW purposes.

This will be dependent on what type of accommodation is provided. Accommodation that is not job-related, for example ‘council housing’, may be exempt under certain circumstances.


...apprentices should be paid the NMW for time they spend training or studying ... 


8. Not paying for all the time worked such as time spent travelling, training or downtime at the employer’s disposal – It is worthwhile mentioning ‘sleep-ins’ again. Allowances paid for sleeping in will not count towards NMW where the employer provides suitable facilities for sleeping and the employee is not expected to be disturbed. Payment for time spent sleeping will count towards the NMW where suitable sleeping arrangements are not provided, or where there is a reasonable chance that the employee will be expected to be disturbed. 

The notorious Mencap case, dating from July 2018, confirmed this point. However, if the Supreme Court considers the appeal being made, it might issue a judgment which changes the circumstances in which NMW is due for sleep-in shifts. Any judgment is unlikely to be issued until 2020.

It is important to note that the NMW may also apply in cases where an employee is paid for being on ‘standby’, where the worker is required to be at a particular location during a particular time. If the worker is permitted to remain at home whilst waiting for work, then employers would not need to include this waiting time in their NMW calculations, although they would still need to factor in any time which the worker actually spends doing the work when on-call.

9. Not paying for additional time worked such as time spent clearing security checks once a worker’s shift has finished – This will also include time spent ‘clocking on/off’ as well.

10. Including elements of pay that don’t count towards minimum wage such as tips and the premium element of pay associated with shift premium – You would only count the basic pay rate for hours worked for overtime, rather than ‘time and a half’, etc. 


... any time which the worker actually spends doing the work when on-call...


And finally…

In a very recent NMW case (February 2019), Middlesbrough Football Club has been cleared of failing to pay some of its staff the minimum wage.

The Championship club appealed against an employment tribunal ruling that the club’s decision to deduct the cost of workers’ season tickets directly from their wage packet resulted in them receiving less than stipulated minimum. However, the club has successfully had the ruling overturned after proving the staff had requested the deduction to help spread the payments for the season tickets.

HMRC spokesperson defended its decision to pursue the case. He said: “HMRC is unapologetic in its enforcement of national minimum wage for workers and will ensure that we do everything we can to get people the money that they are legally due. NMW legislation is protective legislation – no worker can agree to receive less than the relevant NMW rate.

“The legislation does not draw a distinction between breaches arising from uncertainty or mistake and deliberate underpayment which means HMRC has no discretion to make these distinctions either. Employers are either compliant and pay their workers correctly, or they do not.” 

The national minimum wage is a very complex area and professional advice should be sought, where there is any doubt.