If you work in the Retail sector take note, the Sherrards Employment Team have a series of blogs coming your way explaining all there is to know regarding employment law in the retail sector. First we focus on the National Minimum Wage.
Retail and Low Pay
In their 2014 Report, the Low Pay Commission revealed that 45% of minimum wage jobs were in hospitality and retail. Employers in the retail industry, therefore, are at greater risk of “getting it wrong” when it comes to calculating and paying the National Minimum Wage (NMW).
Of course, most employers do not intentionally breach their legal obligations but the rules surrounding the NMW can be quite complex, and it is easy to miss some of the nuances.
Below is an overview of some of the key points to consider when checking whether you are compliant with your NMW obligations.
The Minimum Wage
The current hourly minimum wage for adults aged over 21 is £6.31, which will increase to £6.50 on 1 October 2014. Younger employees, and those on apprenticeships, attract lesser hourly rates between £2.68 and £5.03.
Employers who fail to pay at least the minimum wage will be subjected to tough penalties and the current maximum fine for anyone failing to pay the NMW is £20,000. In the Queen’s Speech earlier this month, it was announced that the Government is proposing to increase this fine to £20,000 per employee (see our Blog).
HMRC can also “name and shame” companies which do not pay the minimum wage. Clearly, this could have a significant detrimental impact on an organisation’s reputation.
The Risk of “Getting it Wrong”
Payment of the minimum wage is not always straightforward. Some employers base their pay on a number of factors, not just set hourly rates for hours worked. Employees may be given additional benefits (including, for example, accommodation) and/or are part of commission schemes.
So, what are some of the key points that employers should be aware of when paying their employees?
- The right to receive the NMW extends to “workers”, not just employees. It does not extend to genuinely self-employed individuals. Agency workers are entitled to the NMW, but genuine volunteers are not.
- Not all payments/benefits given to the worker count towards the calculation of the NMW.
-Basic salary, incentive payments and bonuses count.
-Payments for loans, advances of wages and benefits in kind (e.g. meals, luncheon vouchers, company cars) do not.
-Tips, gratuities and service chargers cannot be taken into account.
– Accommodation may count, up to a maximum value.
- Check what hours attract the NMW. Specific rules cover travel, training, on-call and standby time.
- Make sure that working time and pay is properly recorded. Tribunals will presume that the worker has been paid a rate less than the NMW unless the employer can show otherwise – keeping records is therefore of vital importance. Employers must keep records sufficient to establish that workers have been paid at a rate at least equivalent to NMW, for a period of 3 years.
- Keep a note of birthdays! It is surprising how many employers inadvertently breach their minimum wage obligations because they have failed to recognise the step change between different ages of workers. Retail employers often have a significant number of workers under 21, so this point is important.
- Remember that, if workers are required to purchase items in order to carry out their work, e.g. uniforms, this sum will be deducted from the calculation of the NMW.
- Be careful when making deductions from a worker’s pay. Even if the deduction is lawful, it may reduce pay to below NMW levels.
If your worker is “non-standard”, i.e. being paid a basic hourly rate of at least £6.31 for each hour worked, it may be worth going through a risk analysis to check that you are compliant with the NMW.
The law in this area is constantly developing, so if there are complicating factors (e.g. if the worker spends time on call or on standby), you would be well advised to speak to Joanne Perry or Mark Fellows in St Albans, Hertfordshire, and London, to ensure that you are not breaching your legal obligations!